Linear supply functions Paper 3 Calculations
- Explain a supply function (equation) of the form Qs = c + dP.
- Plot a supply curve from a linear function (eg, Qs = –30 + 20 P).
- Identify the slope of the supply curve as the slope of the supply function Qs = c + dP, that is d (the coefficient of P).
- Outline why, if the “c” term changes, there will be a shift of the supply curve.
- Outline how a change in “d” affects the steepness of the supply curve.
NB: (+)d is made up of two components the sign (positive) and the number (b)
the positive sign is because of the direct (positive) relationship between price and quantity supplied (Law of supply)
the number indicates the gradient (slope), again the bigger the number the flatter the gradient:
Just change the coefficient on P say 10P and 30P
See what happens to the gradient as the coefficent becomes bigger
Confirm the rule: The bigger the coefficient the f------ (---- steep) the supply curve
For higher level, you need to be able to understand linear supply functions and to be able to calculate supply and plot a supply curve from a supply function. The presentation below goes through this. Click on the screenshot or link below to open the presentation. It will open in a new web window. You will need a headset or speakers to listen to the explanation.