Gobbet 3 - Supply Schedule Solution

# Gobbet 3 - Supply Schedule Solution - Gobbet#3 Market...

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Gobbet #3: Market Supply (These problems are adapted from Callan and Thomas: Environmental Economics and Management , 2004) Consider the following supply schedule: PRICE (P) Quantity Supplied by Producers (bottles/month) \$0.50 100 1.00 300 1.50 500 2.00 700 2.50 900 3.00 1,100 3.50 1,300 4.00 1,500 4.50 1,700 5.00 1,900 Plot the supply curve in product space (that is with prices along the vertical axis and quantity along the horizontal axis). Derive the linear supply and inverse supply equations from the table. SOLUTION Quantity Price Supply 0.25 1

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This problem uses the exact same techniques as described in the Gobbet #2 solution. Either equation can be found first, by using the point-slope formula. Just like with demand, the supply equation describes quantities as a function of price, while the inverse supply equation describes price as a function of quantities. This inverse demand equation is typically referred to as the marginal cost function; as it describes the additional cost of providing one more unit of the item. The supply equation has the form:
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