Question

You are the manager of a monopolistically competitive firm, and your demand and cost functions are given by q = 36 – 4p and c(q) = 4 4q q2

Answer 1

The inverse demand function views price as a function of quantity. The inverse demand function of the firm will be:

$\rm P=9-0.25Q$

What is the inverse demand function?

The inverse demand function is the function that represents price as the function of quantity demanded. The graph of inverse demand puts a price on the y axis and the quantity demanded on the x-axis.

a. The inverse demand function of the firm will be calculated as follows:

The demand function is:

$\rm Q=36-4P$

The inverse demand function is the demand function in terms of price. Therefore inverse demand function will be:

$\rm Q=36-4P\\\\4P=36+Q\\\\P=\dfrac{36}{4}+\dfrac{Q}{4}\\\\P=9+\dfrac{Q}{4}$

$\rm P=9-0.25Q$

Hence, The inverse demand function views price as a function of quantity. The inverse demand function of the firm will be $\rm P=9-0.25Q$.

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