Introduction

After you have worked through this section of the learning unit, you should be able to:

  • write the supply function as an equation

With the information on the previous page, it is now possible to write a supply equation as follows, using symbols:

Qs = f(Px, Pc, T, Pg, N, ...)

In words, the above equation means that the quantity supplied of a good or service (Qs) is a function of the price of the good or service (Px), the cost of production (Pc) , technology (T), the price of related goods (Pg), the number of suppliers (N) and other factors. The other factors are things such as the weather and expected price.

Watch the following video clip about the supply equation:

Activity

Do the following activity on the supply equation:

Given the supply equation, which is the dependent variable?

Qs = f(Px, Pc, T, Pg, N, ...)

Click to see the answer

The dependent variable is Qs. The other variables (Px, Pc, T, Pg and N) are the independent variables.

Write down the symbol for the following supply factors:

Cost of production __________
Technology __________
Number of suppliers ___________
Number of other factors ____________

Click to see the answer

Cost of production: Pc
Technology: T
Number of suppliers: N
Number of other factors: …