Inverse demand function

In economics, an inverse demand function is the inverse function of a demand function. The inverse demand function views price as a function of quantity. In economics, an inverse demand function is the inverse function of a demand function. The inverse demand function views price as a function of quantity. Quantity demanded, Q, is a function f {displaystyle f} (the demand function) of price; the inverse demand function treats price as a function of quantity demanded, and is also called the price function: In mathematical terms, if the demand function is f(P), then the inverse demand function is f−1(Q), whose value is the highest price that could be charged and still generate the quantity demanded Q. This is to say that the inverse demand function is the demand function with the axes switched. This is useful because economists typically place price (P) on the vertical axis and quantity (Q) on the horizontal axis. The inverse demand function is the same as the average revenue function, since P = AR. To compute the inverse demand function, simply solve for P from the demand function. For example, if the demand function has the form Q = 240 − 2 P {displaystyle Q=240-2P} then the inverse demand function would be P = 120 − 0.5 Q {displaystyle P=120-0.5Q} .