The following general supply function shows the quantity of good X that producers offer for sale (Q
Question:
The following general supply function shows the quantity of good X that producers offer for sale (Qs):
Qs = 19 + 20Ps - 10PI + 6T - 32Pr - 20Pe + 5F
where Px is the price of X, PI is the price of labor, T is an index measuring the level of technology, Pr is the price of a good R that is related in production, Pe is the expected future price of good X, and F is the number of firms in the industry.
a. Determine the equation of the supply curve for X when PI = 8, T = 4, Pr = 4, Pe = 5, and F = 47. Plot this supply curve on a graph.
b. Suppose the price of labor increases from 8 to 9. Find the equation of the new supply curve. Plot the new supply curve on a graph.
c. Is the good related in production a complement or a substitute in production? Explain.
d. What is the correct way to interpret each of the coefficients in the general supply function given above?
Step by Step Answer:
Managerial Economics Foundations of Business Analysis and Strategy
ISBN: 978-0078021909
12th edition
Authors: Christopher Thomas, S. Charles Maurice