Answer to Question #161553 in Microeconomics for Purva

Question

The demand curve for good X passes through the point P = $2 and Qd = 35. Give two interpretations

Answer 1

The general demand function shows the relationship of demand of good with six variable which have direct effect on the demand of that good or service. Those variables are price of the good, price of the related good, income, consumer taste, expected price and number of customers.

The two interpretations of a point on demand curve i.e. P is $2, and Q is 35, are that when price is $2 then there will be demand of 35 units of the good. Second interpretation is that to buy 35 units of good the consumers maximum willingness to pay is $2.