Question

Explain the supply function.

Answer 1

A supply function is a way to express the key factors that affect supply. The link between the quantity of a commodity delivered and its determinants is expressed by the supply function.

The supply function may be written as:

S_n = f (P_n, P₁, ... P_{n − 1}, G_f, F_i ... F_m, T, E, G_t, N, M_t ...)

where S_n is the quantity supplied of a commodity ‘n’; f is a symbol showing the relationship between supply of a commodity ‘n’ and all its determinants; P_n is the price of commodity ‘n’; P₁ ... P_{n − 1} are the prices of commodities other than ‘n’; G_f is the firm's objective; F_i ... F_m is the expression for prices of various factors of production; T is the production technique; E is a symbol for expectations about future prices; G_t is the government taxation policy; N is the expression for the natural factors, and M_t stands for transportation.