EconomicsISC Class 11 · Mathematical Tools Used in Economics

Straight Lines in Economics: Demand, Supply, Consumption and Cost (ISC Class 11)

Updated 17 October 2026 · Fact-checked

Many economic relationships are modelled as straight lines: demand Qd = a - bP (negative slope), supply Qs = c + dP (positive slope), consumption C = a + bY (b = MPC), saving S = Y - C, and total cost TC = FC + (MC x Q). Equilibrium is found by setting Qd = Qs; the break-even income is where C = Y; the slope of the cost line is marginal cost.

Demand slopes down, supply slopes up; they meet where Qd = Qs, giving equilibrium price P* and quantity Q*.

Illustration drawn for QuestionBuddy.

Understand Straight Lines in Economics: Demand, Supply, Consumption and Cost

Demand line. Qd = a - bP; the slope (-b in Q-P terms) is negative because of the law of demand; a is the quantity demanded at zero price.

Supply line. Qs = c + dP; positive slope: higher price, more supply.

Equilibrium. Qd = Qs gives the equilibrium price; substitute back to get the equilibrium quantity.

Consumption function. C = a + bY, where Y is income, a is autonomous consumption (consumption at zero income) and b the marginal propensity to consume (MPC = ΔC / ΔY). Average propensity to consume APC = C / Y.
Saving function. S = Y - C = -a + (1 - b)Y; MPS = 1 - MPC. Break-even income: where C = Y, so S = 0.

Cost function. TC = FC + MC x Q for a linear case: FC is the intercept; the slope is marginal cost (constant). AVC = variable cost per unit; AC = TC / Q.
Revenue and break-even. TR = P x Q. Break-even output where TR = TC.

Linear vs non-linear. Linear: constant slope. Non-linear: the slope varies (U-shaped average cost; curved PPC). Many economic curves are drawn straight for simplicity.

Shifts and movements. A change in the intercept shifts the line parallel; a change in the slope rotates it.

Straight Lines in Economics: Demand, Supply, Consumption and Cost: key facts

Equilibrium: Qd = Qs | Solve for P, then substitute to get Q; Linear demand and supply.
Consumption and saving: C = a + bY
S = Y - C = -a + (1 - b)Y
MPC = b, MPS = 1 - b; Break-even where C = Y.
Linear cost: TC = FC + MC x Q | AC = TC / Q; FC is the intercept.

How to answer Straight Lines in Economics: Demand, Supply, Consumption and Cost questions

Write the functions, equate where needed and substitute back.

1Identify the intercept and slope of each line.
2For equilibrium, set Qd = Qs and solve for P.
3Substitute P back to find Q.
4Interpret the result in economic terms (price, MPC, marginal cost).

Straight Lines in Economics: Demand, Supply, Consumption and Cost in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Break-even income

Suppose a household consumes C = 2,000 + 0.75Y per month, where Y is monthly income.

At what income does the household neither save nor dissave?

Try it first, then show the solutionSolution

Set C = Y: Y = 2,000 + 0.75Y.
0.25Y = 2,000, so Y = Rs 8,000.

Answer: Rs 8,000.

Memory hook: Break-even: spending equals income.

Tricks to remember Straight Lines in Economics: Demand, Supply, Consumption and Cost

Short memory aids. Say each one aloud once, then use it on a question the same day.

Equate then substitute
Set Qd = Qs, find P, then Q.
Use it when: Equilibrium.
MPC + MPS = 1
What is not consumed is saved.
Use it when: Propensities.
Intercept = fixed
The cost line starts at fixed cost.
Use it when: Cost.

Straight Lines in Economics: Demand, Supply, Consumption and Cost: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: MPC · 1 mark · MCQBoard level

If the consumption function is C = 300 + 0.6Y, the MPC is:
(a) 300 (b) 0.6 (c) 0.4 (d) 0.9

Try it first, then show the solutionSolution

The slope of the consumption line is MPC.

Answer: (b) 0.6

Example 2: Equilibrium · 5 marks · Long answerBoard level

Demand is Qd = 100 - 5P and supply is Qs = 20 + 3P. Find the equilibrium price and quantity. Find the excess supply at P = 12. (5 marks)

Try it first, then show the solutionSolution

Qd = Qs: 100 - 5P = 20 + 3P, so 80 = 8P and P = 10.
Q = 100 - 50 = 50 (check supply: 20 + 30 = 50).
At P = 12: Qd = 100 - 60 = 40; Qs = 20 + 36 = 56.
Excess supply = 56 - 40 = 16 units.

Answer: P = Rs 10, Q = 50 units; excess supply of 16 at P = 12.

Example 3: Consumption and saving · 6 marks · Long answerHarder board level

The consumption function is C = 200 + 0.8Y. Find the saving function, the break-even income, and C, S and APC at Y = 2,000 and Y = 500. (6 marks)

Try it first, then show the solutionSolution

S = Y - C = Y - 200 - 0.8Y = -200 + 0.2Y; MPS = 0.2.
Break-even: Y = 200 + 0.8Y, so Y = 1,000.
At Y = 2,000: C = 1,800; S = 200; APC = 0.9.
At Y = 500: C = 600; S = -100 (dissaving); APC = 1.2.

Answer: S = -200 + 0.2Y; break-even income 1,000; at 2,000: C = 1,800, S = 200; at 500: C = 600, S = -100.

Example 4: Cost and revenue · 6 marks · Long answerHarder board level

A firm's total cost is TC = 5,000 + 20Q and it sells at Rs 30 per unit. Find the fixed cost, marginal cost, AC at Q = 250, the break-even output and the profit at Q = 800. (6 marks)

Try it first, then show the solutionSolution

Fixed cost = 5,000; marginal cost = 20.
At Q = 250: TC = 5,000 + 5,000 = 10,000; AC = 40.
Break-even: 30Q = 5,000 + 20Q, so Q = 500.
At Q = 800: TR = 24,000; TC = 21,000; profit = Rs 3,000.

Answer: FC = 5,000; MC = 20; AC at 250 = Rs 40; break-even Q = 500; profit at 800 = Rs 3,000.

Example 5: Shift in demand · 6 marks · Long answerHOTS / competency

Following an income rise, demand becomes Qd = 130 - 5P while supply stays Qs = 20 + 3P. Find the new equilibrium and the changes in price and quantity. A tax of Rs 4 per unit on suppliers shifts supply to Qs = 20 + 3(P - 4) at the new demand; find the new price paid by buyers and the quantity. (6 marks)

Try it first, then show the solutionSolution

New equilibrium: 130 - 5P = 20 + 3P, 110 = 8P, P = 13.75; Q = 130 - 68.75 = 61.25.
Price rises by 3.75, quantity by 11.25 compared with 10 and 50.
With the tax: 130 - 5P = 20 + 3P - 12, so 130 - 5P = 8 + 3P, 122 = 8P, P = 15.25; Q = 130 - 76.25 = 53.75.
Buyers pay Rs 15.25; sellers receive 15.25 - 4 = Rs 11.25.

Answer: New equilibrium P = 13.75, Q = 61.25; with the tax buyers pay Rs 15.25 for 53.75 units and sellers keep Rs 11.25.

Where students lose marks in Straight Lines in Economics: Demand, Supply, Consumption and Cost

The slips examiners see most often, and what to write instead.

Mistake: Forgetting to substitute back for Q
Stopping at P.
Wrong working
P = 10 only
Right working
P = 10 and Q = 50
Do this: Find both.
Usually costs: 1-2 marks.
Mistake: Computing S as C - Y
Sign reversed.
Wrong working
S = C - Y
Right working
S = Y - C
Do this: Savings are what is left.
Usually costs: 2 marks.
Mistake: Using AC as the slope of TC
Confusing average with marginal.
Wrong working
MC = TC / Q
Right working
MC = slope = 20
Do this: MC is the slope for a linear cost.
Usually costs: 2 marks.

Exam tips

State the equation first, then solve.
Check equilibrium by substituting in the other function.
Interpret each result in economic terms.

Practice questions on Straight Lines in Economics: Demand, Supply, Consumption and Cost

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
MPC + MPS equals:
(a) 0 (b) 0.5 (c) 1 (d) 100
Hint
Income is consumed or saved.
Answer
(c) 1
Q2 · 3 marks · Short answerBoard level
The supply function is Qs = 10 + 4P. Find the quantity supplied at P = 5, P = 8 and the price at which supply is 70. (3 marks)
Hint
Substitute.
Answer
At P = 5: 30; at P = 8: 42; for Qs = 70: 70 = 10 + 4P, P = 15.
Q3 · 4 marks · Short answerHarder board level
Demand Qd = 240 - 6P and supply Qs = 60 + 4P. Find the equilibrium. If the government fixes a price of Rs 14, find the excess demand or supply. (4 marks)
Hint
180 = 10P.
Answer
P = 18, Q = 132. At Rs 14: Qd = 156; Qs = 116; excess demand = 40.
Q4 · 4 marks · Short answerHarder board level
The consumption function is C = 150 + 0.75Y. Find the break-even income, saving at Y = 1,000, and the change in saving if income rises from 1,000 to 1,400. (4 marks)
Hint
MPS = 0.25.
Answer
Break-even: Y = 600. At Y = 1,000: C = 900; S = 100. At Y = 1,400: C = 1,200; S = 200. Saving rises by 100 = 0.25 x 400.
Q5 · 5 marks · Long answerHOTS / competency
Two firms: Firm A has TC = 2,000 + 10Q; Firm B has TC = 500 + 25Q. Find the output at which total costs are equal, and which firm is cheaper for 80 units and for 120 units. Explain in terms of fixed cost and marginal cost. (5 marks)
Hint
2,000 + 10Q = 500 + 25Q.
Answer
Equal at 1,500 = 15Q, Q = 100 (TC = 3,000). At 80: A = 2,800; B = 2,500, so B is cheaper. At 120: A = 3,200; B = 3,500, so A is cheaper. A has a higher fixed cost but lower marginal cost, so it wins at larger output.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Equilibrium condition?Show answer
Qd = Qs.
2.MPS equals?Show answer
1 - MPC.
3.Break-even income?Show answer
Where C = Y.
4.Slope of a linear TC?Show answer
Marginal cost.
5.Intercept of TC?Show answer
Fixed cost.

Straight Lines in Economics: Demand, Supply, Consumption and Cost: frequently asked questions

Are real demand curves straight?

Rarely; straight lines are simple models.

What is autonomous consumption?

Consumption at zero income.

What does a negative S mean?

Dissaving.

How does a tax shift supply?

It raises the cost, shifting supply up.