SUPPLY

Supply vs Stock
Supply Stock

Quantity of goods or
services which is Quantity in existence
offered to the market at a specific period of
for sale at a specific time
price over a specific
period of time

Determinants of Supply

Price of the goods

Cost of factors of production

Changes in technology

Price of related goods

Number of firms in the industry

Taxes and subsidies

Goals of Business firm

Law of Supply

1. Cause and effect relation between price and quantity supplied

2. Ceteris Paribus – Other things (non-price variables) remaining

the same

3. With increase in price, supply increases and vice versa

Price (Cause) Supply (Effect)

Expressing Supply

Supply Schedule (Tabular): Individual and market supply schedule

Supply Curve (Diagrammatic): Positive Slope, slopes upward from left

Supply Function (Algebraic): Sx = f (Px, Cx, Tx)

Px = Price of goods X

Cx = Cost of Production

Tx = Technology of Production
 Individual Supply Schedule for Commodity X
Price per unit of Commodity X Quantity of Commodity X
PX (Units)
10 1000
20 2000
30 3000
40 4000
50 5000
60 6000
Y

6
X axis 1 Unit = 1000
5
Y axis 1 Unit = 10
4
Price

1
1 X
0 1 5 9
2 3 4 6 7 8 10
Quantity Supplied
 Market Supply Schedule for Commodity X
Price per unit of Quality supplied by Market supply
commodity producer
X
Px QA QB QA+QB
10 1000 2000 3000
20 2000 3000 5000
30 3000 4000 7000
40 4000 5000 9000
50 5000 6000 11000

X axis 1 Unit = 10

Y axis 1 Unit = 1000

5

4
Price

X
0 1 5 9
2 3 4 6 7 8

QA
 Y
X axis 1 Unit = 10

Y axis 1 Unit = 1000

5

4
Price

X
0 1 5 9
2 3 4 6 7 8

QB

Y X axis 1 Unit = 10

Y axis 1 Unit = 1000

4
Price

X
0 5 9
1 2 3 4 6 7 8

QA + QB