Posted by Managerial economics on .
The general supply function for new housing in Miami is estimated to be Qs=96+2P-10Pl-4Pk where P is the price per square foot of new housing in Miami, PL is the average hourly wage rate for construction workerw, and PK is the price of capital (as measured by the average rate of interest paid on loans to home builders). Os is measured in units of 1,000 square feet per month.
Does if make sense for PL and PK to have negative coefficients in the general supply function? Explain why or whay not.