Linear Supply Functions

Paper 3 - HL
Learning Outcomes
● Explain a Supply Function in the form Qs=c+d(P)
● Plot a Supply curve from a Linear Function
● Identify that “d” is the slope of the Supply Function -
Qs=c+d(P)
● Outline why, if “c” changes, there will be a shift in the
Supply Curve
● Outline how the steepness of the Supply Curve is
affected by a change in “d”.
Supply Function
Qs = c + d(P)

Qs = Quantity Supplied

c = quantity produced at a price of 0

d = represents the sensitivity of Producers to
changes in price
 Qs = -250 + 100P
1. Calculate the Price Quantity Supplied
Supply Schedule for
0
Espresso coffee.
1

2
2. Calculate the Price
3
when the Quantity
4
Supplied is 0.
5

6
 Qs = -250 + 100P
Price Quantity Supplied
Price Intercept
Qs = -250 + 100P 0 -250

1 -150
0 = -250 + 100P
2 -50
250 = 100P 3 50

P = $2.50 4 150

5 250

6 350
Graph the Function
 Qs = -250 + 100P
Change in “c” occur when there is a change in
a non-price determinant.
A favorable growing season had increases
the supply of coffee. “c” = -50
1. Write the new Supply Function.
2. Calculate the new Supply schedule
3. At what price will firms begin to consider selling
Espresso now.
4. Graph it with the original function.
 Qs = -250 + 100P
1. Qs = -50 + 100P Price Quantity
Supplied
0 -50

3. Qs = -50 + 100P 1 50

0 = -50 + 100P 2 150

3 250
50 = 100P 4 350

P = $.50 5 450

6 550
 Qs = -250 + 100P
Originally for every $1 increase in price, Producers would
supply 100 espressos.

Assume the Producers are more responsive/sensitive to

price change. In other words they are willing to supply
more to the market as price increases.

Now every $1 price increase, Producers will Supply 150

espressos.
 Qs = -250 + 150P
The new Supply Function is

Qs = -250 + 150P
Calculate the new Supply schedule & graph.

What do you notice about the new Supply curve in relation

to the old curve? Does this make sense? Explain.