Inverse supply function is a mathematical equation that links the price of goods as a function of the quantity supplied.
For example, the supply function equation is QS = a + bP – cW. QS is the quantity supplied, P is the price of a good, and W is the wage.
We can determine the inverse supply function by switching prices to the left of “=”. So, we can write the function as an inverse function as follows:
bP = -a + QS + cW
P = (-a + QS + cW)/b = – (a/b) + (1/b) QS + (c/b) W.
What is the inverse supply function for?
Inversing the supply function makes it easy for us to determine the slope of the supply curve. Economists illustrate the relationship between price and quantity supplied based on the inverse function. The x-axis represents quantity, and the y-axis represents a price. Therefore, the slope of the supply curve is the coefficient on the quantity supplied in the inverse function (1/b).