Supply Function and Supply Equation

 

Supply Function

The functional relationship between the quantity of commodities supplied and various determinants are known as supply function. It is the mathematical expression of the relationship between supply and factors that affect the ability and willingness of the producer to offer the product. The relationship may exist between two or more number of variables.

Mathematically, a supply function can be expressed as

Q_s = f(P; P_rg) where,

Q_s = Quantity of commodity supplied

P = Price of the good

P_rg = Price of related good

 

Individual Supply Function

The algebraic expression of an individual supply schedule is called individual supply function. An individual supply schedule is a tabular statement representing the various amounts of a commodity that a single producer is willing to sell at a different price, during a given period of time.

Individual supply schedule
Price of milk per liter (in Rs.)	Quantity supplied per day in liters (*1000)
10	10
12	13
14	20
16	25

Mathematically, a supply function can be represented as

S_x = f(P_x, Po, P_f, S_t, T, G) where,

S_x = Supply of the commodity x

P_x = Price of the commodity x

P_rg = Price of related goods

P_f = Price of factors of production

S_t = State of technology

T = Taxation policy

G = Goals of the firm

 

Market Supply Function

Market supply function is the algebraic expression of the market supply schedule. Market supply schedule can be defined as the tabular statement which represents various amounts of a commodity that the entire producers in the whole economy are willing to supply at the optimal price, at any given time.

Market supply schedule
Price of the product X per unit (in Rs.)	Individual supply per day			Market supply per day
	A	B	C
100	750	500	450	1700
200	800	650	500	1950
300	900	750	650	2300
400	1000	900	700	2600

Market supply function can also be defined as the summation of individual supply functions within a specific market.

Mathematically, a market supply function can be represented as

S_x = f(P_x, Po, P_f, S_t, T, G, N, F, M) where,

S_x = Market supply of the commodity x

P_x = Price of the commodity x

P_rg = Price of related goods

P_f = Price of factors of production

S_t = State of technology

T = Taxation policy

G = Goals of the market

N = Number of firms

F = Future expectation regarding price of the commodity x

M = Means of transportation and communication

Adopted from: https://www.businesstopia.net/economics/micro/supply-function