In several places, we have warned you about the decision of Marshall to ‘‘reverse the axes’’ by putting price on the vertical axis and quantity on the horizontal axis. This problem shows that it makes very little difference how you choose the axes. Suppose that quantity demanded is given by QD = –P + 10, 0 ≤ P ≤ 10, and quantity is supplied by QS = P – 2, P ≥ 2.
a. Why are the possible values for P restricted as they are in this example? How do the restrictions on P also impose restrictions on Q?
b. Graph these two equations on a standard (Marshalling) supply-demand graph. Use this graph to calculate the equilibrium price and quantity in this market.
c. Graph these two equations with price on the horizontal axis and quantity on the vertical axis. Use this graph to calculate equilibrium price and quantity.
d. What do you conclude by comparing your answers to parts a and b?
e. Can you think of any reasons why you might prefer the graph part a to that in part b?