Assume the supply function for good X can be written as
Qs = -100 + 27Px - 5Py - 1.8W
where Px = the price of X,
Py = the price of good Y,and
W = Wage index for workers in industry X.
This equation implies that X and Y are complements in production.

Question

Quizplus · Accepted Answer

This equation implies that X and Y are substitutes in production, as the supply of X decreases with an increase in Py. Complements in production would mean that the supply of X increases with an increase in Py.

Assume the Supply Function for Good X Can Be Written