Calculus with Applications (10th Edition)

Published by Pearson
ISBN 10: 0321749006
ISBN 13: 978-0-32174-900-0

Chapter 1 - Linear Functions - 1.2 Linear Functions and Applications - 1.2 Exercises - Page 23: 17

Answer

A linear function may not be adequate for describing the supply and demand functions.

Work Step by Step

In real world, the supply and demand functions are not necessarily linear. Sometimes, the supply and demand curves take non-linear shapes such as concave or convex. This depends on the nature of the goods or services being considered, market conditions, individual demand, etc. In economic models, linear functions are often considered for the sake of simplicity. They may not always represent the complex dynamics of the real market. The demand function is non linear when the quantity demanded is a non linear function of the price. eg: $q=99-p-2p^2$ , $q$ is the quantity demanded and $p$ is the price of the good. The supply function is non linear if it has an unequal slope. i.e. both dependent variable and independent variable change at different rates. A non linear supply function is represented as $s=ap^b$, where $p$ is the price of the good, $a$ is the quantity supplied at $p=0$, and $s$ is the quantity supplied.
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