Consider the general supply function: Qs=1,000+20P-9P1+25F Qs=Quantity supplied P=price of commodity P1=price of a key input...
Consider the general supply function: Qs=1,000+20P-9P1+25F
Qs=Quantity supplied
P=price of commodity
P1=price of a key input in the production process
F=number of firms producing the commodity
What is the value of the coefficient of the price of the commodity? Does it have the theoretically correct algebraic sign? Why?
Homework Answers
The value of the coefficient of the price of the commodity is 20. Yes, it have the theoretically correct algebraic sign because according to law of supply, price and quantity supplied varies directly with each other. That is, if price increases then quantity supplied also increases. This means the sign should be positive which is same as the sign of the coefficient of price of the commodity in this case, +20.
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Consider the general supply function:
Qs=1,000+20P-9P1+25F
Qs=Quantity supplied
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P1=price of a key input...
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