Unit 5

Question 1

Supply is a function of input and output prices, fixed factors, weather, technology, institutional arrangements (government policy), and risk considerations.

Give example of a linear form of this model:

Answer 1

Qt = β0 + β1PtO + β2PtI + β3Tt + β4Wt + β5Govt + εt

PtO & PtI = prices of outputs and inputs
Tt = technology
Wt = weather
Govt = government policy(/ies)
Qt = quantity supplied