In the equation below what is the correct interpretation of

In the equation below, what is the correct interpretation of the coefficient in front of P?

Q = 50 - 2P

Solution

This equation is an equation of inverse demand curve.

Q = 50 - 2P

Whenever, there is a one unit increase in P, there is a 2 unit decrease in Q.

For instance, when P=1

Q1=50-2*1

Q1=48

hen P=1

Q2=50-2*2

Q2=46

Q2-Q1=2

Hence, we observe that for a 1-unit increase in P, there is a 2 unit decrease in Q.