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    Supply

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    sachin8910
    Supply refers to the quantity of a good or service that sellers are willing and able to provide at a given price. The key factors that determine supply are the price of the good, costs of production, technology, government policies, and number of firms. The law of supply states that, all else equal, a higher price leads to a greater quantity supplied (the supply curve slopes upward). A change in supply results from factors that affect production costs or seller incentives, causing the supply curve to shift. Market equilibrium occurs where quantity demanded equals quantity supplied. Changes in supply or demand can shift the equilibrium point to a different price and quantity.

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    Supply

    Uploaded by

    sachin8910
    32 views9 pages
    Supply refers to the quantity of a good or service that sellers are willing and able to provide at a given price. The key factors that determine supply are the price of the good, costs of production, technology, government policies, and number of firms. The law of supply states that, all else equal, a higher price leads to a greater quantity supplied (the supply curve slopes upward). A change in supply results from factors that affect production costs or seller incentives, causing the supply curve to shift. Market equilibrium occurs where quantity demanded equals quantity supplied. Changes in supply or demand can shift the equilibrium point to a different price and quantity.

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    Economics

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    4

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    Supply refers to the quantity of a good or service that sellers are willing and able to provide at a given price. The key factors that determine supply are the price of the good, costs of production, technology, government policies, and number of firms. The law of supply states that, all else equal, a higher price leads to a greater quantity supplied (the supply curve slopes upward). A change in supply results from factors that affect production costs or seller incentives, causing the supply curve to shift. Market equilibrium occurs where quantity demanded equals quantity supplied. Changes in supply or demand can shift the equilibrium point to a different price and quantity.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    32 views9 pages

    Supply

    Uploaded by

    sachin8910
    Supply refers to the quantity of a good or service that sellers are willing and able to provide at a given price. The key factors that determine supply are the price of the good, costs of production, technology, government policies, and number of firms. The law of supply states that, all else equal, a higher price leads to a greater quantity supplied (the supply curve slopes upward). A change in supply results from factors that affect production costs or seller incentives, causing the supply curve to shift. Market equilibrium occurs where quantity demanded equals quantity supplied. Changes in supply or demand can shift the equilibrium point to a different price and quantity.

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    Supply

     Indicates the quantities of a good or service that the


    seller is willing and able to provide at a price, at a given
    point of time, other things remaining the same.
     Supply of a product X (Sx) depends upon:
     Price of the product (Px)
     Cost of production (C)
     State of technology (T)
     Government policy regarding taxes and subsidies (G)
     Other factors like number of firms (N)
     Hence the supply function is given as:
    Sx = (Px, C, T, G, N)
    Law of Supply
     Law of Supply states that other things remaining the same, the
    higher the price of a commodity the greater is the quantity supplied.
     Price of the product is revenue to the supplier; therefore higher price
    means greater revenue to the supplier and hence greater is the
    incentive to supply.
     Supply bears a positive relation to the price of the commodity.

    Supply Schedule Supply Curve


    Point on Price Supply (‘000 35 e
    Supply (Rs. Per cups per 30
    Curve cup) month) d
    25
    a 15 10 c
    20
    b 20 20 b
    15
    c 25 30 a

    d 30 45
    10 20 30 40 50 60
    e 35 60
    Quantity of Coffee
    Change in Quantity Supplied
    Price
    Supply
    curve, S1

    2 As price changes,
    quantity supplied
    changes
    1.50

    0 2 3 Quantity
    Change in Supply

     Shift in the supply curve from


    S0 to S1
    S2  More is supplied at each
    Price S0 price.
     Increase in supply caused by:
    S1
     Improvements in the
    technology
     Fall in the price of inputs
     Shift in the supply curve from
    S0 to S2
     Less is supplied at each
    price.
     Decrease in supply caused by:
    O  A rise in the price of inputs
    Quantity  Change in government
    policy (Tax)
    Market Equilibrium
     Equilibrium occurs at the price where the quantity demanded
    and the quantity supplied are equal to each other.
     For prices below the equilibrium, quantity demanded
    exceeds quantity supplied (D>S). Pulling price upward.
     For prices above the equilibrium, quantity demanded is less
    than quantity supplied (D<S). Pushing price downward.

    Supply Demand(‘0
    Price S Price (‘000 cups / 00 cups /
    (Rs) month) month)
    E 15 10 50
    25
    20 15 40
    25 30 30
    D 30 45 15
    O 35 70 10
    30 Quantity
    Changes in Market Equilibrium
    (Shifts in Supply Curve)

     The original point of equilibrium is


    at E curves D1 and S1, at price P and
    quantity Q
    S0

    Price
     An increase in supply shifts the
    supply curve to S2. D1 S1
    Price falls to P2 and quantity rises S2
    to Q2, taking the new equilibrium to E0
    P0
    E2 . E
    P E2
     A decrease in supply shifts the P2 0
    S
    supply curve to S0. Price rises to P0 S1
    and quantity falls to Q0 taking the S2
    new equilibrium to E0 D1
    Thus an increase in supply raises O
    Q0 Q Q2 Quantity
    quantity but lowers prices while a
    decrease in supply lowers quantity
    but raises price; demand being
    unchanged.
    Changes in Market Equilibrium
    (Shifts in Demand Curve)

     The original point of equilibrium is


    at E curves D1 and S1, at price P and
    quantity Q
    Price

     An increase in demand shifts the


    D2 demand curve to D2 .
    S1  Price rises to P1 and quantity
    D1
    rises to Q1 taking the new
    D0 equilibrium to E1
    E1
    P1  A decrease in demand shifts the
    E demand curve to D0.
    P E2
    P*  Price falls to P* and quantity falls
    D2 to Q* taking the new equilibrium
    to E2.
    S1 D0 D1
     Thus, an increase in demand
    O raises both price and quantity while a
    Q* Q1
    Quantity decrease in demand lowers both
    price and quantity; when supply
    remains same.
    Change in Both Demand and Supply
    Overall effect depends on supply response. Whether price will
    rise, or remain at the same level, or will fall, will depend on the
    magnitude of shift and also on the shapes of the demand and
    Price supply curves.

    Supply

    Rs 2.50 New equilibrium


    Further
    2.00
    resulting supply
    in a higher Initial
    price... equilibrium
    D2

    D1

    0 7 10 13 Quantity
    Change in Both Demand and Supply
     Therefore, an increase in both
    supply and demand will cause
    the sales to rise, but the effect
    on price can be
     positive, D increases
    more than S
     negative S increases
    more than D
     No change increase in
    D=S

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