Demand Curve: It shows the relationship between the quantity demanded of a commodity with variations in its own price while everything else is considered constant.

Demand Curve: Qd = 20 - .5P P P = 40 - 2Qd 40 Q

Supply Curve: Shows the relationship between the quantity supplied of a commodity with variations in its own price while everything else is considered to be constant.

Supply Curve P Qs= – .15 + .3P P = .5 + (10/3) Qs Q

Excess Supply P Supply 25 Demand Q 7

Profit = TR - TC TR = P × Q Q = 10 – .10P P = 100 – 10Q TR = (100 – 10Q)×Q = 100Q – 10Q2 AR = TR/Q = 100 - 10Q when, Q ¹ 0

TR = 100Q – 10Q2

TR Q Q1 Q2 Q3 Q4 Q5 Q6 MR AR AR Q MR

TC TC Q1 Q Q2 AC, MC MC AC Q

Profit Maximization: TC TR MC MR Q1 Q2 Q p Q

Optimization & Marginal Analysis : Marginal Cost is defined as the change in total cost per unit change in output and is given by the slope of the TC curve. As long as the slope of the TR curve or MR exceeds the slope of the TC curve or MC, it pays for the firm to expand output and sales. The firm would be adding more to its total revenue than to its total costs and so its total profit would increase. To make it general, according to the marginal analysis as long as the marginal benefit of an activity (such as expanding output or sales) exceeds the marginal cost, it pays for the organization (firm) to increase the activity (expand output). The total net benefit (profit) is maximized when the marginal benefit equals marginal cost.