Ch.

2 Supply Analysis
 A Lecture of

Imranul Hoque
Associate Professor
Department of Marketing
Jagannath University
Dhaka-1100, Bangladesh.

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 SUPPLY

◈ Supply is the quantities that would be offered for sale at all possible
prices prevail in the market.

◈ The amount of a good or service offered for sale in a market during a

given period of time (e.g., a week, a month).

◈ The total quantities that producers are willing and able to supply at
various price.

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 THE LAW OF SUPPLY

◈ The quantity supplied, or offered for sale, varies directly with its price.

◈ If prices are high, suppliers will offer greater quantities for sale.
◈ If prices are low, suppliers will offer smaller quantities for sale.

◈ A change in overall supply will cause the demand curve to shift.

◈ A change in quantity demanded will move along the original curve.

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 SUPPLY SCHEDULE AND CURVE

◈ Supply Schedule

○ A table showing a list of possible product prices and the

corresponding quantities supplied.

◈ Supply Curve

○ A graph showing the relation between quantity supplied and price,

when all other variables influencing quantity supplied are held
constant.

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 SUPPLY
Figure 5.1 SCHEDULE AND CURVE

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 SUPPLY CURVE

◈ Individual Curve

○ Illustrates how the quantity that a producer makes varies

depending on the price that will prevail in the market

◈ Market Curve

○ Illustrates the quantities and prices that all producers will offer in
the market for any given product or service

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 INVIDUAL
Figure 5.2 AND MARKET SUPPLY CURVE

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 Change in Quantity Supplied

◈ Quantity Supplied:
○ The amount that producers bring to the market at any given
price
◈ Change in Quantity Supplied:
○ The change in the amount offered for sale in response to a
change in price

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 CHANGE IN SUPPLY
Figure 5.1

◈ Situation where suppliers offer different

amounts of products for sale at all possible
prices
◈ Illustrates a change in quantity supplied
○ Shows as a movement along the line
○ Can increase or decrease amount of
the product (movement from a to b)

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 CHANGE IN SUPPLY

◈ Cost of inputs
◈ Productivity
◈ Technology
◈ Number of producers/Entry or exit of producers
◈ Taxes and subsidies
◈ Expectations
◈ Government Regulations
◈ Opportunity costs

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 Elasticity of Supply

◈ Supply Elasticity: A measure of the way in which a quantity supplied

responds to a change in price

◈ Elastic
○ Small increase in price leads to a larger increase in output supply

◈ Inelastic
○ Small increase in price causes little change in supply

◈ Unit Elastic
○ A change in price causes a proportional change in supply
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 CHANGE IN SUPPLY
Figure 5.4d

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 CHANGE IN SUPPLY
Figure 5.4a Figure 5.4b

Figure 5.4c

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 DETERMINANTS OF SUPPLY ELASTICITY

◈ How quickly a producer can act when a change in price occurs:

○ Adjust quickly = elastic, Complex/advance planning = inelastic
◈ Factor of Substitution: Easy = Elastic, Difficult = Inelastic
◈ Time Element
◈ Nature of Commodity
◈ Nature of inputs
◈ Nature of technique of production
◈ Expectations about future prices

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 SUPPLY FUNCTION

The supply function of a good describes how much of the good will be produced
at alternative prices of the good, alternative prices of inputs, and alternative
values of other variables that affect supply.
Qxs = f(Px, Pr, W, H)
■ Qx = the quantity supplied of a good
■ Px = the price of the good
■ W = the price of an input (such as the wage rate on labor)
■ Pr = the price of technologically related goods
■ H = the value of some other variable that affects supply (such as the
existing technology, the number of firms in the market, taxes, or producer
expectations)
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Thanks

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