Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Price and quantity are the exogenous variables in this representation.

Question

Quizplus · Accepted Answer

In the traditional graph of supply and demand, quantity is on the horizontal axis and price is on the vertical axis. Therefore, the variables are reversed in the statement. Additionally, in this graph, neither price nor quantity are considered exogenous variables since they are determined by the intersection of the supply and demand curves. In the traditional demand and supply model, price is on the vertical axis and quantity is on the horizontal axis. Therefore, price is the exogenous variable and quantity is the endogenous variable.

Suppose That We Illustrate Demand and Supply with Quantity on the Horizontal