Question

Please on supply function and inverse supply function. If you are given the equation: Qx =-30+2Px_4Pz , suppose Pz is $60 , what is the supply function and the inverse supply function.

Answer 1

(a) If $P_z=\$60$, then the supply function for good X takes form:

$$Q_x^s=-30+2P_x-4\cdot60=-270+2P_x.$$

(b) Let's find the inverse supply function:

$$Q_x^s+270=2P_x,$$ $$P_x=0.5Q_x^s+135.$$