Porisma

Worked solution

Fit a price adjustment to the shortage between two curves

The given diagram has quantity QQ tonnes on the horizontal axis and price PP dollars per kg on the vertical axis. Consumer curve C1C_1 and producer line C2C_2 meet at A=(1,4)A=(1,4). Consumer quantity is inversely proportional to price, while producer quantity is directly proportional to price.

(i) Interpret AA in context.

(ii) Find both equations, expressing QQ in terms of PP.

A shortage occurs when consumer quantity exceeds producer quantity. The rate of increase of price after tt months is proportional to this shortage.

(iii) Given an initial price of $3 and a price of $3.65 after one month, find P(t)P(t) and sketch it, showing its long-term behaviour. Suggest why producers might use P=aQ+bP=aQ+b, a,b>0a,b>0, instead of C2C_2.

Expand diagram

Use the scrollbars or arrow keys to inspect details.

Given price-quantity diagram: Q tonnes is horizontal and P dollars per kg is vertical. Consumer hyperbola P=4/Q and producer line P=4Q meet at A=(1,4); the producer line passes through the origin.
Given price-quantity diagram: Q tonnes is horizontal and P dollars per kg is vertical. Consumer hyperbola P=4/Q and producer line P=4Q meet at A=(1,4); the producer line passes through the origin.
Given price-quantity diagram: Q tonnes is horizontal and P dollars per kg is vertical. Consumer hyperbola P=4/Q and producer line P=4Q meet at A=(1,4); the producer line passes through the origin.

[2017/NJC/I/10(b)]

CJC · Review problems · Question 10

Answer

Qc=4/PQ_c=4/P, Qs=P/4Q_s=P/4; P(t)=16−7(1071/2800)t→4P(t)=\sqrt{16-7(1071/2800)^t}\to4 dollars per kg.

(i) Interpret both coordinates with their units

At a price of $4 per kg, producers supply 11 tonne of rice and consumers buy all of it. Supply and demand match: this is the equilibrium point.

How did this part go?

(ii) Calibrate the two proportionality laws

C1:Q=k1/PC_1:Q=k_1/P and C2:Q=k2PC_2:Q=k_2P. Using Q=1Q=1, P=4P=4 gives k1=4k_1=4, k2=1/4k_2=1/4. Thus consumer quantity is Qc=4/PQ_c=4/P and producer quantity is Qs=P/4Q_s=P/4.

How did this part go?

(iii) Derive the price equation from the shortage

For the observed prices below equilibrium, shortage is 4/P−P/44/P-P/4. Thus P′=k3(4/P−P/4)=k3(16−P2)/(4P)P^{\prime}=k_3(4/P-P/4)=k_3(16-P^2)/(4P), k3>0k_3>0. Separating gives ∫4P/(16−P2)dP=∫k3dt\int4P/(16-P^2)dP=\int k_3dt, hence −2ln⁡∣16−P2∣=k3t+C-2\ln|16-P^2|=k_3t+C. Therefore 16−P2=AeBt16-P^2=Ae^{Bt}, where B=−k3/2<0B=-k_3/2<0. Take the positive price root P=16−AeBtP=\sqrt{16-Ae^{Bt}}.

How did this part go?

(iii) Use both price observations before rounding

P(0)=3P(0)=3 gives A=7A=7. Then P(1)=3.65P(1)=3.65 gives eB=(16−3.652)/7=1071/2800e^B=(16-3.65^2)/7=1071/2800 and B=ln⁡(1071/2800)≈−0.96102663B=\ln(1071/2800)\approx-0.96102663. The exact fitted expression is P(t)=16−7(1071/2800)tP(t)=\sqrt{16-7(1071/2800)^t} for t≥0t\ge0. The source’s rounded display P≈16−7e−0.961tP\approx\sqrt{16-7e^{-0.961t}} is retained as an approximation; the square root, visible in the source, is lost by native extraction.

How did this part go?

(iii) Sketch the adjustment and interpret the alternative producer law

The price curve starts at (0,3)(0,3), passes through (1,3.65)(1,3.65), increases with decreasing slope, and approaches P=4P=4 dollars per kg from below. For P=aQ+bP=aQ+b, a positive intercept bb can represent a minimum price needed to cover fixed initial investment costs; the source notes that production requires the price to cover those costs. Direct proportionality alone puts the producer line through the origin.

How did this part go?

Compare your sketch

Expand diagram

Use the scrollbars or arrow keys to inspect details.

Price P versus time t in months increases concave down from (0,3) through (1,3.65), approaching the horizontal asymptote P=4 dollars per kg.
Price P versus time t in months increases concave down from (0,3) through (1,3.65), approaching the horizontal asymptote P=4 dollars per kg.
Price P versus time t in months increases concave down from (0,3) through (1,3.65), approaching the horizontal asymptote P=4 dollars per kg.

Common mistakes

Keep the positive square root and fit the second observation before rounding the exponential rate.

Read the hint