Willy’s widgets, a monopoly, faces the following demand schedule (sales of widgets per month):
Price
To answer this question, you would need information about the price and corresponding quantity demanded at each price level. Once you have that data, you can determine the equation for the demand curve, which will provide a clearer understanding of the relationship between the price and quantity demanded.
The demand schedule could be as follows:
Price ($ per widget) Quantity Demanded (widgets per month)
------------------------------------------------------------
$5 200
$4 300
$3 400
$2 500
$1 600
With this demand schedule, we can calculate the slope of the demand curve by using the formula:
Slope of demand curve = (change in quantity demanded)/(change in price)
For example, if we calculate the slope between the first two data points, we get a slope of:
Slope = (300 - 200)/($4 - $5) = 100/(-$1) = -100
By calculating the slope using the other data points, we will find that the slope is consistent at -100 for all price and quantity combinations. Therefore, the equation for the demand curve in this case would be:
Quantity demanded = a + b * Price
Given that the slope (b) is -100, we can use any point from the demand schedule to find the intercept (a). For example, using the first data point (Price = $5, Quantity demanded = 200), we can substitute those values into the demand curve equation:
200 = a + (-100) * 5
200 = a - 500
a = 700
Hence, the equation for the demand curve is:
Quantity demanded = 700 - 100 * Price