^{Given the Lucas formulation of supply}^Yi ⁼^h^[^Pi ^-^P^{] +}^Yi^,^where^Yi A) positive because prices are sticky going down. B) negative because the lack of pricing information is positively correlated with output. C) positive because, when the relative price of their product rises, firms increase their output. D) negative because firms' implicit demand curves are assumed to be negatively sloped. E) none of the above.

Question

Quizplus · Accepted Answer

The Lucas supply function implies that output increases when the relative price of a firm's product increases, as firms are more willing to produce more when they can sell their products at higher prices relative to others. This is a basic principle of supply in economics, where higher prices lead to an increase in the quantity supplied, assuming other factors remain constant.

Given the Lucas Formulation of Supply Yi = h[Pi -

^{Given the Lucas Formulation of Supply}^Yi ⁼^h^[^Pi ^-