Suppose that the market demand is given by Q(p)=200-5p. Let p(q) be the maximal price at...

Suppose that the market demand is given by Q(p)=200-5p. Let p(q) be the maximal price at which the agents would buy q units, i.e., the inverse demand function. Then?

a. p(q)=40-5q

b. p(q)=40-0.2q

c. p(q)=40-0.4q

d. p(q)=200-10q

e. p(q)=200-5q

Solutions

Expert Solution

The demand function is given as:

Q(p) = 200 - 5p

The inverse demand function represents the price as a function of quantity demanded. It is the inverse of the demand function. So,

Q(p) = 200 - 5p (given)

5p = 200 - Q(p)

P(q) = 40 - 0.2q

So, the inverse demand function is P(q) = 40 - 0.2q. Therefore, the correct answer is 'Option B'.

Rahul Sunny answered 1 year ago

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