SOCIAL STUDIES

Supply

➔ represents the amount of goods and services available for consumption at different
prices

Law of Supply

➔ states that all other factors remaining unchanged the supply of a good increases as its
price increases
➔ states that there is a positive relation between price and quantity supplied
➔ can be shown by a supply schedule, supply curve, and supply function

Supply Schedule

● table showing the different units of the product that can be sold at different prices

Supply Curve

● graphic representation of the direct relationship of price and quantity of products

● drawn as a slope rising upward from left to right
● shows the minimum price producers are willing to charge
● will shift upwards on a graph if the prices of inputs into production go up

Supply Function

● illustrated in a mathematical equation

● Qs is the dependent variable and P is the independent variable

Price

● the important factor that determines the quantity of goods that supplier are willing to sell

Causes in the increase in the supply

1. Improvements in technology
2. Fall in the price of factors of production
3. Increase in the number of firms in the market

Causes in the decrease in the supply

1. Outdated technology
2. Increase in taxation
 3. Decrease in the number of firms in the market

Determinants of Supply

● Price
● Cost of production
● Technological progress
● Prices of related outputs
● Govt policy

Equilibrium or Market Equilibrium

➔ a market condition where the quantity supplied equals the quantity demanded
➔ every buyer has a seller and vice versa
➔ perfect balance in supply and demand
➔ determines market output and price
➔ no reason for the market to deviate
➔ forces of demand and supply stabilize

Equilibrium Price

● the price level that both buyers and sellers agree to consummate a transaction in the
market

Equilibrium Quantity

● the quantity of products that buyers and sellers have agreed to transact at a specified
price

Deficient Supply or Excess Demand

● demand of the commodity is more than the quantity supplied

Deficient Demand or Excess Demand

● demand of the commodity is less than the quantity supplied

Price Support

● implemented to help the producers recover their production cost and to gain some profit

Price Control

● implemented when a state of calamity is declared

 ● lower than the equilibrium price in the market

Price Ceiling or Control Price

● the highest price or maximum price declared by the government

Price Floor or Floor Price or Support Price

● the lowest price in buying the products of farmers

● creates excess supply

Subsidy

● the help from the government which may be in cash or in kind

Shortage

● when demand is more than the supply

Producers

● people who make and sell goods and services

Consumer

● role of the government when there is a surplus in the market

Market

● the place where there is transaction among the buyers and sellers

Black Market

● selling commodity at a price higher than ceiling price

Hoarding

● stocking supplies to create a further shortfall

Additional Notes!

- when the price of the product is high, producers will sell more

- when the price of the product is low, producers will sell less

- Modern machines speed up production processes and increase output

- Price increase serves as incentives to sellers to supply more products

- The producers' behavior are examined through supply

- Shortage leads to price rise

- Surplus leads to price fall

- Market shortage makes the consumer compete among themselves

- The bigger the discount is, the more products consumers buy

- Consumers and suppliers are two important personalities in the market

- Any movement from supply and demand affects the market equilibrium

- The agreement of consumers and producers is important in the market

- The interaction of demand and supply leads to the establishments of a market price