Question: A manufacturer makes two products out of two raw materials. Let q1, q2 be the quantities sold of the two products, p1, p2 their prices, and m1, m2 the quantities purchased of the two raw materials. Which of the following functions do you expect to be linear, and why?
In each case, assume that all variables except the ones mentioned are held fixed.
(a) Expenditure on raw materials as a function of m1 and m2.
(b) Revenue as a function of q1 and q2.
(c) Revenue as a function of p1 and q1.