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September 19th, 2009, 10:38 AM   #1
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Supply and Demand

I need help deriving supply and demand equations
I'll give the problem and answer, but I need to know how to get the equation. Is it through linear regression or other means?

At 4.80 per bushel, the annual supply for soybeans in the Midwest is 1.9 billion bushels and the annual demand is 2.0 billion bushels. When the price increases to 5.10 per bushel, the annual supply increases to 2.1 billion bushels and the annual demand decreases to 1.8 billion bushels.

The supply equation is p=1.5x+1.95
The demand equation is p=-1.5x+7.8

Thanks!
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September 19th, 2009, 04:31 PM   #2
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Re: Supply and Demand

I take it from your example that supply and demand are linear in money. In this case you only need two points to get the curves. For supply, you have (x,y) as (4.80, 1.9) and (5.10, 2.1). So the equation is (on your assumption that it is linear) y = mx + b. Putting in the numbers above, you have
1.9 = 4.80m + b
2.1 = 5.10m + b

Subtract, solve for m, then substitute and solve for b. You can then do the same for demand.
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September 20th, 2009, 06:31 AM   #3
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Re: Supply and Demand

Thanks, I figured them both out. The book said something about using Linear regression and we had not even studied that yet.
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September 20th, 2009, 08:33 AM   #4
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Re: Supply and Demand

I think of linear regression (what you did to solve the above problem) as a 10th-grade topic and microeconomics as a 13th-grade topic, so it seems reasonable to expect knowledge of the former when working on the latter. (I was fortunate enough to have studied both earlier.)
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