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Hello Sir. Hope you are doing well.
Can you tell me what does it means when we say that Algebraic method assumes that there is a consistent relationship between Demand and Cost.That is in case the Demand increases the prices would fall by the per unit variable cost and vice versa.
It uses the price demand formula, and when there is a formula relating the two then it is automatically assuming that there is a constant relationship.
I assume you have watched the free lectures and therefore are happy that the price demand equation assumes a linear relationship (whereas, as again explained in the lectures, the tabular approach does not require there to be a linear relationship).
(Have you actually watched all of our free lectures? I ask because our tutors are the most experienced tutors in the business and all of us have spent many years lecturing for BPP and/or Kaplan 🙂 )
Yes Sir, i have watched all your lectures :).
While revising things if i feel stuck at any point i ask you.Sir does that mean that only when there is any demand we would incur variable cost and in case there is no demand there would be no variable cost.
“In case the Demand increases the prices would fall by the per unit variable cost and vice versa”.
What I’m unable to understand is what about Statement means. Why would prices fall by per unit variable cost.?
I have no idea from where you are quoting this statement and in what context.
All that is relevant is that the price demand equation assumes a linear relationship between the price and the level of demand, whereas the tabular method does not make that assumption. (Just as is the case in the examples that I work through in my lectures.)
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