EMERGING CONCEPTS OF BUSINESS ECONOMICS 2019

TABLE OF CONTENTS

1. INTRODUCTION……………………………………………….…………………...3

2. LAW OF SUPPLY……………………………………………….…………………3-5

3. DETERMINANTS OF SUPPLY………………………………………………..…5-7

4. SHIFT IN CURVE…………………………………………………………....………7

5. ELASTICITY OF SUPPLY………………………………………………..……….8-9

6. TYPES OF SUPPLY ELASTICITY……………………………….……...………9-11

7. CONCLUSION…………………………………………………..………...……….12

LAW OF SUPPLY
 EMERGING CONCEPTS OF BUSINESS ECONOMICS 2019

CONCLUSION

The law of supply summarizes the effect price changes have on producer behaviour. For
example, a business will make more video game systems if the price of those systems
increases. The opposite is true if the price of video game systems decreases. The company
might supply 1 million systems if the price is $200 each, but if the price increases to $300,
they might supply 1.5 million systems.

To further illustrate this concept, consider how gas prices work. When the price of gasoline
rises, it encourages profit-seeking firms to take several actions: expand exploration for oil
reserves; drill for more oil; invest in more pipelines and oil tankers to bring the oil to plants
where it can be refined into gasoline; build new oil refineries; purchase additional pipelines
and trucks to ship the gasoline to gas stations; and open more gas stations or keep existing
gas stations open longer hours.

LAW OF SUPPLY