Economics Review: Linear Cost, Revenue, and Price Functions (Page 1)

Vocabulary flashcards covering linear depreciation, total cost, revenue, profit, and the demand and supply price-quantity relationships as described on Page 1.

Linear Depreciation

A linear model for asset value over time: v(t) = m t + b, where m is the slope (rate of change) and b is the intercept (initial value).

Total Cost Function

C(x) = m x + F, where m is the variable cost per unit and F is the fixed cost; total cost equals variable costs plus fixed costs.

Revenue

R(x) = p x, where revenue equals price per item p times quantity sold x.

Profit

P(x) = R(x) - C(x); profit equals revenue minus total cost; can be written as P(x) = (p − m) x − F.

Demand Function

The relationship between price and quantity demanded; notes present a linear form showing price as a function of quantity (P = m x + b).

Supply Function

The relationship between price and quantity supplied; notes present a linear form showing price as a function of quantity (P = m x + b).