L4: Supply

TOPIC Midterms

SLIDES

CLASS MODE LECTURE

Completed

Date @February 3, 2022

What is Supply?

- Quantity of goods and services that sellers are willingly able to sell or
produce in a given time period.

Law of Supply.

- A direct relationship between the price of a commodity and quantity

supplied

Quantity Supplied

- the number that will be supplied to the public at a given price

Supply Function

Qs = c + dP
c = quantity demanded if the price is 0/ d = change in quantity supplied / P
= price

Supply Schedule

- tabular statement showing the different quantities of a commodity which

will be supplied or produced at its different prices

L4: Supply 1
 Supply Curve

- Graph of the relationship between the price of a commodity and quantity

supplied

Factors Affecting the Supply

L4: Supply 2
 Number of Firms

Technology

Price of Inputs

Price Expectations

Tax and Subsidies

Price of Related Goods

1. Number of Firms

Direct Relationship

⬆ F ⬆ Qs & ⬇ F ⬇ Qs
2. Technology

Direct Relationship

⬆ T ⬆ Qs & ⬇ T ⬇ Qs
3. Price of Inputs

Inverse Relationship

⬆ Pi ⬇ Qs & ⬇ Pi ⬆ Qs
4. Price Expectations

Inverse Relationship
⬆ Pe ⬇ Qs & ⬇ Pe ⬆ Qs
5. Taxes and Subsities

Taxes - Inverse Relationship

⬆ Tx ⬇ Qs & ⬇ Tx ⬆ Qs
Subsidies - Direct Relationship

L4: Supply 3
 ⬆ Su ⬆ Qs & ⬇ Su ⬇ Qs
6. Price of Related Goods

Price for Substitutes - Inverse Relationship

⬆ Ps ⬇ Qs & ⬇ Ps ⬆ Qs
Price for Compliments - Direct Relationship

⬆ Pc ⬆ Qs & ⬇ Pc ⬇ Qs
Difference between change in quantity supplied and change in supply

Change in Quantity Supplied

Takes place due to changes in price

Strictly abiding the law of supply

The graph shows only one supply curve

Change in Supply

Takes place due to changes in supply caused by the different factors

affecting supply

The graph shows two supply curves

Right: Increase in Supply

Left: Decrease in Supply

L4: Supply 4