What would happen to supply if the average wage increased

Reference no: EM13206430

The following supply function was estimated for milk:
Qs = 80P - 30F - 50W + 150T
Where:
Qs = quantity supplied (3.600 cwt. Average),
P = milk price ($15.00/cwt.),
F = feed cost ($60/ton average),
W = average hourly wage paid for labor ($7.20/hour average), and
T = index of technology (average is 4).
NOTE: For any linear equation, Y = a1 X1+ a2 X2, the formula for Y/?Xi = ai (for i = 1, 2). For example, in the supply equation above, Qs/T = 150. You should use this formula in computing the answers to the questions below.

a) Compute the own price elasticity of supply.

b) Compute the elasticity of supply with respect to feed cost.

c) Compute the elasticity of supply with respect to technology.

d) Compute the elasticity of supply with respect to wage rate.

e) Based on the elasticity of supply with respect to wages, what would happen to supply if the average wage increased from $7.20 to $7.56 per hour?

Reference no: EM13206430

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