University of the Punjab

Department of Economics
Subject: Microeconomics
Topic: The Application of Price on Y-
axis and Quantity on X-axis Analysis

Assignment Submitted to: Azmat Hayat

Assignment Submitted by: Iqra Tahir
Class: MSc. Economics(M)
Roll No: M-10
Session :2019-2021
INTRODUCTION
In economics, price and quantity of a particular product are represented
on Y and X axes, respectively in the graphical analyses of demand and supply.
Many have not recognized why this has taken place in economics in comparison
with mathematical relationship between independent (X) and dependent (Y)
variables. They term this as a misspecification in graphs of demand and supply in
economics as speculated by ancient economists, and accept this approach in view
of the scholarly work done by many economists as a conventional approach.
EXPLANATION
Following are the reasons why price is on y-axis and quantity on y-axis:
1. In utility theory, quantities of a product as an independent variable
determine TU of a person consuming the product continuously. The MU is
derived from TU as per the additional quantity of product consumed. The
utility process transforms MU-quantity relationship into price-quantity
relationship for a product per person. High MU is regarded as high price
and low MU is as low price. Therefore, the negative relationship of MU
with quantity is implicated into price – quantity relationship.
2. Theory of firm is related to production and related cost determination.
Firms are concerned with determining cost of production based on numbers
of output. In this context, the quantity is an independent variable on X-axis
and the respective costs are on Y-axis as a dependent variable. In theory of
firm, the information of these costs for a product needs to be incorporated
with demand of the product in market. As price is independent in demand
function and quantity is independent in cost of production, placing
independent and dependent variables on X and Y axes respectively become
mess and would not produce any simple derivation of decisions for
determining the firm’s sales price of its product and equilibrium. As initial
process begins with production process and the price is determined in cost of
production with the numbers of products to be supplied in market, a
common application for placing quantity and monetary value on X and Y
axes needs to be clarified. This complexity has been settled down with
placing quantity on X-axis as initially considered in theories of cost of
production and utility.
Basically, Marshall presents the theory in which he takes price on Y-axis
and quantity on Y-axis because he was plot the inverse demand function.
AR = f (Q)