The following economic functions have been derived by the Finance Manager of
a tea company:
Qa = 3p2 – 4p and
Qb = 24 – p2; where p represents price and Q is quantity
Required:
a) i) Which of the two functions represents a demand curve, supply curve and
why? (4 marks)
ii) At what values of price and quantity is the market in equilibrium?
(6 marks)
b) Explain, with the aid of a diagram, the effect on the demand and supply functions
indicated in (a) above of a simultaneous decrease in cost of production and an increase
in the price of a complementary good.
(10 marks)