3 J 4 ew 2 a 2 2 2 2 2 2 2 B 5 2 =] > > 2 2 =) 2 Supply And Elasticity Of Supply Page 127 Praveen Juneja (98960-34231) Aly SUPPLY AND ELASTICITY OF SUPPLY doedtgers ad CONCEPTS MARKET SUPPLY [SUPPLY (INDIVIDUAL) [QUANTITY SUPPLIED Fife L. + Ader ce v 1 Peklert| PAKe. itis amount of goods offered)itis amount of goods offered for for sale by ALL THE}sale by seller at DIFFERENT [SELLER in the market at/PRICES within given period of DIFFERENT PRICES within|time.it is part of stock and a (given period of time. schedule in itself itis amount of goods offered for lsale by seller at A SPECIFIC PRICE within given period of Itime.It is part of supply| Ischedule.e.g a seller wants to sell at Shel STOCK :: It is PART OF GOODS PRODUCED which is unsold.In other words ,it represents total quantity of commodity available with sellers in market at given time where as Supply is that, PART OF STOCK WHICH IS ACTUALLY BROUGHT into market during given period of time stock of a crop . In this period price tendsto suPPLY EXAMPLE :: After harvest , a farmer acquires | bi oe price, ~* be low. The Farmer holds back his stock . he dO tises , the farmer offer more and more stock for sale’ For instance, supply of oil is NOT THE TOTAL AVAILAI which producers are willing to bring to the market for sale brought, } ‘pre STOCK OF OIL, but only that amount sedge pode ESSING SUPPLY THREE ALTERNATIYI (3) SUPPLY CURVE (1) SUPPLY FUNCTION SUPPLY FUNCTION :: Itshotg and its various determinants(factor affe (LINEAR SUPPLY CURVE ) FRypply) Ss edie. oo aint - ce bebe Market S,=F(PyPy Pp TG EEN» G) (7 9) ya) ie FEF SUPPLY OF COMMODITY AND PRICE OF COMMODITY (S, & P,) LAW OF SUPPLY “Other thing being constant, quantity supplied and price of the commodity ig. POSITIVELY RELATED. In other words with rise in price, quanfty sungliegises and with fall in price quantity supplied fallsie.P QS,P QS O7BC Biscw ] 4ve Aelahen EXAMPLE : S, = 120+ P, Frhe law explains the cause for Movement along supply curveSupply And Elasticity Of Supp ASSUMPTION: pp. > peribus ) Praveen Juneja (98960-34231) case constant ( ceteris + Pes T, GFE, N,, G, that is. all other thing being t SUPPLY SCHEDULE :: itis TABULAR PRESENTATION of Quantity supplied at different Price at given time, , Ertoe @-Supplied (units) P Pe Ine. NOs ty 4 80 P oor secontt? feted s 3 50 ‘ hnOs moreno 2 5 7 oe we TT 00 R “ in 2 Gice a f t Qs Os i i & Q the sélleris not Itis clear from the table as Price decreases , supply contracts-Ata prite AS orless Wiling to sell any unit . This PRICE AT WHICH SELLER IS NOT PREPARED TO SELL ANY UNIT and prefers to stock the commodity is called MINIMUM PRICE OR RESERVE PRICE SUPPLY CURVE :: Itis GRAPHICAL PRESENTATION of. quantity supplied at different price. It BPE supply schedule on a curve. -ItREPRESENT SUPPLY SCHEDULE ONACURVE. A A he curve is UPWARD. ‘SLOPING from leftto Bupplied and price of the commodity, => 'OR’is reserve price. At ‘OP’ price quantity supp Ma quantity supplied extends to‘Os,’ . E FPUANTITATIVE :: LOs makes a yES oO} THE DIRECTION OF CHANGE in the © Mangrlitdde of change .Thus it fails to aj er “HOW MUCH CHANGES? will result GyeRO chang in pi on FE hod rice of good concerned Dice LAW OF SUPPLY IS ONE SIDED’ magnitude Plains the effect on quantity supplied due to change in price .It FAILS TO STATE 7 UANTITY SUPPLIED : Thus it assume qual 7 FFECT ON PRICE DUE TO CHANG! IN pity supplied to be passive factor Pp “u ey REASON FOR LAW OF SUPPLY Mot temp SPrrice, (1) PROFIT MOTIVE :: The basic aim of eve, Profits. When price of a commodity increases .w other hand , with fallin prices , Supply decreases due (2) CHANGE IN NUMBER OF FIRM ::, tise in price induces the to enter into the market to produce the given commodity so as to earn higl“ee ees Oe DEOUHKKE HOS BOO OTCEEHOEC ESE S$ Supply And Elasticit icity OFS Supply Page 129 Praveen Juneja (98960-34231) (3) CHANGE IN Ss " " stock which means SIOEKs i When price of good increases , sellers are ready to open their SUPP LY AND PRICE OF RELATED GOODS (SUBSTITUTE GOOD) (S, &P,) Aninei ai nara a rice of other (related) goods makes them more profitable and hence the firm ipply of the goods the price of which has risen (i.e. supply of substitute good) and th erebydecre ising the supply of the commodity the price of which has not ris ( Thus supply of the commodity and price of its substitute are inversely related t==> It explains the SHIFT OF SUPPLY CURVE e.g if a farmer is producing corn and wheat ona given piece of land, eed (1) If the market price of wheat falls,farmer will produce more corn (as production increases from OL to OM at existing price) due to increase in profitability. This will shift the supply curve of com to RIGHT FROM SS TO S'S* grit et price of wheat rises, farmer will produce production decreases from OL to ON at This will shift existing to decrease in profitabi the supply cue com tof EFT FROM SS TO $75? ° Qs Sy EY SUPPLY BY uted“ aun) by (Deed aauhhly > eh; level of inputor™ dest th jut with less input. Thus improvement in technology tenth MARGINAL AND AVERAGE COST OF PRODUCTION e.g. PRINTING OF BOOK was a compleXendcostly process . With introduction of computers it has become an easy and inexpensive job. Ac and MC facing a commercial publisher has decreased many times. This COST-SAVING TECHNOLOGY motivate suppliers to supply more is causes RIGHTWARD SHIFT in supply curve 7! (1) $8 is original supply curve .It increases to S'S! {4 Fightwar indicating increase in supply from OL to OM due /\ue)® to technological improvement ( or reduction in cost) Mi ilarly a COST INCREASING TECHNOLOGY change wy ech may be due to -» Technology degradation > Environment Technologies + Outdated Technologies A ae cause supply to reduce and supply curve will shift ) rightward moore cupid A inhut | tort dos A Sx Same © ar — ao Rok ga) fo Copdess 0%, I. 5 ? Supply And organ Page 130 Praveen Juneja (98960-34231) Que Y SUPPLY ‘AND INPUT PRICE CHANGE : />\x (1) In case of DECREASE IN INPUT PRICE like decrease in Saye ‘ nt reduction, the overall po “ei” raw material cost, wages of labour, rer eo CMe —\) GOP DECREASES and accordingly producers ar 9 / ~ “supply MORE AT EXISTING PRICE. This causes supply curve / to shift RIGHTWARD from SS to S'S*at price OP / EXAMPLE :: To make icecream , firm need various inputs Oo eer eee Te Oi cream , sugar, machine , labour etc. When price of one xt ro / bs or moro of these input falls , producing ice creams will is wa s become more profitable and hence more will be supplied et - (2) In case of INCREASE IN INPUT PRICE like increase in raw material cost, wages of labour, rentenhancement,the overall COP INCREASES and accordingly producers are willing to supply LESS AT EXISTING PRICE. This causes supply curve 1a, {0 shift LEFTWARD from SS to S*S? at price OP SUPPLY AND G OF THE FIRM (a) If Goal of the firm is to MAXIMIZE PROFIT sthen the’ 5 wit Qhierested in supplying mo: quantity only at high price icles (b) If Goal of the firm is to MAXIMIZE Sf move Zep, Steg Bat, Kye hee (a) If the seller expects the FUTURE PRICKOPSTHE COMMODITY To F; il ; stock of the commodity so as to avoid loss in fdjfre due to decrease in Hae INCREASE THE CURRENT SUPPLY of the. “ommodity from OL to OM and will shift th 3 ; curve to right from SS to S'S'(same fig.) ane supply (b) If the seller expects the FUTURE PRICE OF THE COMMOI : DITY TO . commodity so as to sellin future and earn the extra profit due to rise in nes aae sil stock tg DECREASE THE CURRENT SUPPLY of the eommodity rom OL to ON and amp shitthe es a 27S y ‘su curve to left from SS to S°Ssame fig.) Ful Fate. ipply expect. fulne Price 40 af : Aine Nw, U clean tah Aleck, Sm w Sn Cogn) (lel le paitt> = >; ™_ = == 6 wwveVwY we Vey YS Supply And Elastici lasticity’ OFSupply Page 131 Praveen Juneja (98960-34231) RKET SUPPLY AND NO. OF FIRM It effects m: starts we tet only as MORE FIRM in the market means more supply e.g if every farmer mee ng wt at.then the production will be more and hence supply of wheat will OM and will shift the market supply curve to right from SS to S'S" ‘Similarly with DECREAS! eet E IN NUMBER OF FIRMS the supply will will shift the supply curve to left from SS to S?S? mp leet | gSURPLY, AND GOVT.POLICY 3 JAXATION POLICY (like excise duty) SUBSIDY POLICY| Excise tax is tax on the production of goods |itis CASH GRANT given by government which and services and it's levied per unit of|reduces COP and increases supply from OL to production of a firm which raises the marginal{OM and shifts the market supply curve to right cost(MC) and average cost(AC) of production . |from SS to S'S* At high COP producer reduces the supply of the policy followed in case of farmer,exporter taxed item from OL to ON and will shift the supp} ase production of respective goods and curve to left from SS to S*S? ase ofpact and Village ashram to nt to poor villagers. EXCEPTION TO LAW OF $ refers to situation or products wh¢fg ‘leads to expansion of supply and vice-versa 6 APB ) 6 (1) SOCIAL DISTINCTION GO8D cannot be increased even if price for th mona-lisa painting and Tipu sultan sword VW Supply of such goods are fixed or limited and sing eg. there is one and only one genuine (2) AGRICULTURAL PRODUCT :: Subply of such goods depends upon natural factors like rainfall,temperature. Ifthese factors are ‘against the production supply will decrease even if people are ready to pay high price Those goods which GET SPOILED EASILY and hence RISHABLE GOODS :: oF rishable goods fixed ata cannot be stocked eg.milk,vegetables.egg “This makes supply of pe given point of time. d countries , production and (4) BACKWARD COUNTRIES :: In economically backwar supply cannnot be increased with rise in price due to shortage of resourcesSupply And Elasticity Of Supply Page 132 Praveen Juneja (98960-34231) Al Y CURVE is leone MARKET SUPPL’ UE W tal? 'S GRAPHICAL PRESENTATION of i dity by ALL THE FIRM in the supply of a particular commodity by. market AT DIFFERENT PRICES during aver time.Itis presentation of market supply scheduled (Graphically itis derived by Horizontal submission of individual supply curve Suppose there are two sellers Aand B inthe marketyyith their reaped apply ‘schedule . ST Bp 48 Price Q.S (A) Q.S(B) M.SUPPLY(A+B) 1 10 20 20 4 2 20° 30 50 te 3 30 40 70 3 4 40 50 90 2 5 50 60 110 Atprice Rs.1 sellerAis ready to'sell 10 units ie-0A) OB units, at this price market ‘supply is 10+20 =30 unt nd sel{698 is willing to Sell20 units. jchis” [OA+OB=OM ket supply curve is derived which Ise as prices changes , proportionate \groportionate change in individual supplies . D_VS CHANGE IN SUPPLY SHIFT OF DEMAND CURVE / [CHANGE IN SUPPLY 1 Due to CHANGE IN PRICE OF GooD only & Due to change in OTHER FACTORS aE THAN PRICE (P,,P,,7,G,FE,N;G;) " CHANGE IN QUANTITY SUPRL OVEMENT ALONG — SUPPIA URVE // CHANGE IN QUANTITY SUPPLIED Extension or increase in quantity (a) Increase in Supply to RISE in price) x n or decrease in quantity - (b) Decrease in Supply ° in Price ) (a) Supplied (due b)Contractio! 3 Seplied (due to FALL iiPraveen Juneja (98960-34231) SHIFT_IN SUPPLY CURVE // CHANGE IN SUPPLY Supply And Elasticity Of Supply Page 133 MOVEMENT ALONG SUPPLY CURVE // CHANGE IN QUAI SUPPLIED ene The quantity supplied increases or 1 (1)MEANING [The quantity supplied increases or pereosee due to rise or fall in price | decreases due to change in other lonty, es factor keeping price constant (2) CAUSE It occurs due to change in price of good J It occurs due to change in other factor ate: PLT She ca (3) SITUATION et OF SUPPLY CURVE % (A) EXTENSION OF_ 9@R (A) INGREASE IN SUPPLY :: When lincrease-t quantity supplied suppl crease due to others factors (4) TYPES OF |When supply increases due to rise Ake iMtroduction of cost-saving CHANGE price.It is UPWARD MOYEMENT nology. Itis a RIGHTWARD SHIFT p) DECREASE IN SUPPLY :: When PZ ipply decreases due to other factors like introduction of cost increasing technology. Itis a LEFTWARD SHIFT Movement Shi PE QUANTITY SUPPLIED OR CHANGE IN SUPPLY IDENTIFY THE FOLLOWING AS CHANGE IN plied of apple also increases tetove ment (a) The market price of apple increase thus the quantity sup} (b) The price of oranges decreases so the annual production of grapes increases anit 4 eight u (c) Automobiles workers get a 5 % wage increase and so production of automobiles decreas decreases ipl rice of paper , the production of paper decreases. 2 : Novemer oe (d) Due to fall in LonttaSvpply And Elasticity Of Supply BOD 8.0.0 (1) MEANING (2) EXAMPLE (3) TYPES OF CHANGE (4) SITUATION OF SUPPLY CURVE B.O.D (1) MEANING (2) EXAMPLE (3) SITUATION OF SUPPLY CURVE (4) TYPES OF CHANGE Praveen Juneja (98960-34231) Page 134. DISTINGUISH BETWEEN EXTENSION OR INCREASE IN |INCREASE IN SUPPLY UANTITY SUPPLIED [The quantity supplied increases due to rise in price of good only ity supplied increases due The quantity supplied increase: other factors like introduction of cost- saving technology Price (Rs) Q.S (units) 5 100 Price (Rs) _.Q.S (units) 5 ! 6 120 100 5 120 It is UPWARD MOVEMENT and its RIGHTWARD SHIFT and thus refers thus refers to more sale at high price tg More sales at same (given) price. vel The quantity syp to fall in price of Price (Rs) Q..S (units) he quantity supplied decreases due ether factors like introduction of Cost increasing technology Price (Rs) Q.S (units) 5 5 100 ns a ire 8 Sr Lees / / ° : pot es Pal Q7 & It is DOWNWARD MOVEMENT and thus refers to less sale at low price Itis LEFTWARD SHIFT and thus ms fo less sale at same (given price) price,eae meee asinine naa wS- % oat'e® SW de COON yp gH if \ % ry PE oT 6 Me GP ai Of Supply AndElisticity OSply © O @ & @ \ subg CAUSES FOR INCREA: Page 135 raven Juneja (98960-34231) CURVE I! WHY Sei SE IN.SUPPLY // RIGHTWARD SHIFT OF SUPPLY LER SELLS MORE AT SAME PRICE ( GIVEN PRICE) (a) Price of competiti it or petitive good or substitute falls and it is profitable for seller to sell more of own (b) Improvement in technology that leads to cost saving ©) Price of input decreases which reduces cost a sat on changes to sales or employment maximizing (6) Sele ects future price to réduce-and hence increases its sale to clear the stock Tax reduction or rebate policy of govt. (In short govt. have Deficit Budget) \ : ACAUSES FOR DECRE. (ASE IN SUPPLY / LEFTWARD SHIFT OF SUPPLY CURVI SELLER SELLS LESS AT SAME PRICE (GIVEN PRICE) ieee Q fio} com eli¥g ve. goo oy Aubsrule Ape ZB ity oss for pollen toxcld move cliche intechnckoqy, tha fea dso ine. in eggk 6 Price eLinpub wee Th wre. cst Goak fo enedinmm.chamges to pax ray imigabror €) feller ep pects Sulure Pareto ugh Qrence dee. itt pales Lp oye OF MC CURVE The concept of supply curve APPLIF JON OF PERFECT COMPETITION ONLY. It does not apply to monopoly gpolisti ‘tition ‘As we know equilibrium is reache since AR(P) = MR, therefore the firm: duce output where|P = ==> In short run , ifthe firm decides to stop'h ion for sometime then it will have to bear the expenditure on fixed cost. This means as Id as firm is recovering variable cost that is AR (P) > AVC , the firm will continue to produce the gqpds .Thus itfollows that Shortrun supply curve ’ fa perfectly competitive firm is that portion of marginal costiguryahich lies above the average variable cost (AVC) f ne The firm will not supply at a price less than OP because at less than OP price , a firm would not be able to recover its . variable cost, Pt“E” is equilibrium pointas MR = MC andMC Me ie tising and hence 0 is the quantity supplied Thus if we | ae take P,, P,, P, in the figure, the level of output increases from Q, to Q, to Q,, indicating positive relationship between quantity supplied and price of the commodity hence RISING oma PART OF MC above AVC IS THE SUPPLY CURVE 5 ”6 ACEO | CRUE € as Quontitd ytimes change In sup $¢ A We Acinn? —— eine Toy SPE Y Juneja (98960-34231) Supply And tastcity OFSupply 57 fallin pays” “Praveen ELASTICITY OF SUPPLY due to change ELASTICITY OF SUPPLY ::its degree ofresponsiveness of uPPIY in ANY VARIABLE AFFECTING SUPPLY . IESS OF PRICE ELASTICITY OF SUPPLY (E,) :: It is DEGREE OF RESPONSIVEN SUPPLY due to CHANGE IN ITS PRICE. CHANGE IN ITS PRICE it dt MARSHAL “ Price elasticity of supply may be defined as percentage change in supply due to Percentage change in price. E,= [percentage change in supph or rise in supply. or % fall in supph 1D perstie e ntueale ise it % fall in price Percentage change in price % rise in price f fallin pi ial quantity supplied - [saye tal price AP“Q A. aQs=changeinQs (S,-S,) P = change in price (P, -P,) eyed EATURES (ce*v« ¢y: (El) Eloplieidy \ of Dernand mac(Q}UDE OF CHANGE in supply itis QUANTITATIVE MEASURE (1) Itnot only focus on direction of change but also ie how much supply changes due to change in price. Itis meast\p in percentage terms therefore it is fhe quantity supplied is measured in kg or tonnes and whether price is feasureqfin tupeeSef dolllars .This feature FACILITATES COMPARISION BETWEEN TW9/OR MOR S00gy (3) At the intersection of two supply’ wr ELASTIC OR HAVE HIGHER ELASTI (4) Elasticity can be categorised into FIVI VALUES s the curve which is MORE FLATTER IS MORE EISREES depending upon its COEFFICIENT OR DEGREES(TYPES) OF/ELASTICITY OF SUPPLY (1) PERFECTLY INELASTIC(E,=0) :: itis a case when quanti ity supplied donot changes with change in price eg. IN CASE OF PERISHABLE GOOD SSIS FIXED IN SHORT PERIOn &5<6 ‘SUPPLY CURVE IS VERTICAL OR PARALLEL TO Y-AXIS | PRICE(s.) QS . TVs 5 100 6 100 4 ae is yor! a SNe E weights i &g: 1S foe fect i fgya foe xe P,inelaphic ieee Pebaatycaoe ” 2 —— a “ewes we ON Supply And Elasticity Of Sy : 1 ipply Page 137 Praveen Juneja (98960-34231) bala ERFECTLY ELASTIC (E,= a) :: Its a case when supply changes infinitely with no 9° in price or with small change in price . .In other words , there will be infinite rise with small "ise in price and supply becomes zero with small fall in price fe UPPLY CURVE IS HORIZONTAL OR PARALLEL TO X-AXIS} st WHT VEGA PRICE(s.) QS > : 100 ‘ney ere Te 150 SPecomes infin Sbecome Seto Qy E.G :: a seller increases or decreases supply DUE TO FUTURE EXPECTATION even when there is no price change (3) UNITARY ELASTIC(E,=1) :: It is a case when proportionate(%) change in supply is exactly EQUAL TO proportionate(%) change in price. Fe se BuPPLY CURVE STARTS FROM ORIGIN) PRICE(s.) QS 20%change 5 100 20% change inprice 6g 420 8 sy 8 Qc (4) GREATER THAN UNITARY proportionate(%) change in supply is IC or El TIC (E.>1) is a case when IAN proftiynate(%) change in price. Re NEGAAYE RANGE OF KNUS. Sb y4 t 4 4 BUPPLY CURVE STARTS FROM, ras P PRICE(s.) QS 20%change 5 400 S0%chan inpree 6g a0 07 ° Qs (5) LESS THAN UNITARY ELASTIC OR INELASTIC (E,<1) :: It is a case when proportionate(%) change in supply is LESS THAN proportionate(%) change in price. ©, és4 oc Since BC > OC Since BC \S 650 aP ar Yes it , (28) atprice rg 5 A.sojdis 3 a unis how much will be supplied at rs.4 (Given E,=2.5) , “3 Se QS = xo30e a = So -y-Jooe = xz1Soun'h > : 20 5 (QA) Ifatprices.8 A.sold is 20 units, how much will be supplied if price reduces by rs.2 (Given E,, , =3) : ver 32 x-Do y2 2-1 24-00 : o> ye Fam 52 a coun! (5) Due to 10% rise in price from rs.5,Q.supplied increase from 400 units to 450 units.Find E,!s > ‘suy ir ipply inelastic ae ie > 2 9 Ie = IVS 2 IS, Me Eg >) __ fee 72 70 — "aji 160-34231 Supply And Elasticity 0, Praveen Juneja (98960-34231) ir city Of Suppl Page 140 its. Find E,|s supply elastic (Q6) Due to 5% fall in brice supply decieases from 400 unitsby 25 units.Find E, iti Hle pe NES = Boty re 69S 2125 yes tip elbatc = See tity supplied (Q7) When price of the contifodity becomes twice the original price eae coatient of a82d by an amount equal to 4 times the original quantity supplied . Ca 4) Of price elasticity Of supply 7 me €s< 0 degree . When its Price rises by 40%, its ‘quantity supplied riseS by 10 units . calculate its original supply ? S521 {ans 25 units}, t ¥ Ir OS. 9x joeo S- ZX rH 210 . y. BA eo ay xe5e ae . Wo: (C8) When price of a commodity fallby just 10% . the total revenue of a firm become half of the Original total revenue . if at the new price of rs 45, only 10 units are supplied ,Calculate original Quantity supplied and also Es? {ans 4.44} (Q8) The supply curve of the commodity “B” passes through the origin and makes an angle of 60 nd 9, 1.25. calculate percentage (G10) Ifratio of change in quantity to original quanti change in price ? 9 {ans 32%} AO Esp QR fF ‘ e chayiges eye tors3 for both seller weolen) die af es even when absolute change in both cases AS plo = 0-4, (an) & (a)Calculate E, whey ph (b)Why do elasticity aiff issame of 20units deye +o Af price sellerA sellerB P20" “90 th cas Rec 2 40 20 7 Method ; o &g = 7 Alife Inge 3 Es=dag ye 5 100 80 i 7 Alpe ind 4 wide / ot Incl a Ree | ee ~ dolina Values £7! | gq- 1007. % fed in ‘i u to-F aS etre) 0% Dis bp <2 Qiven /. tOune3 wrwvweveNVeOVe well UTC. w —-——"erevwrvwrV eae Supply And Elastici & FACTOR ey Page 141 Praveen Juneja (98960-34231) ‘OR EFFECTING ELASTICITY,OF SUPPLY (E. ce Petipnable >" thelastic (1) NATURE OF CommopiTy \ Durable 3 olaphie (a)Perishable goods which cannot be stor i red eg. milk, vegetable have to be sold on same day and therefore supply is inelastic. ° 5 {b)Durable goods can be stored until seller gets reserve price or demand generates,so it have elastic supply eda ptr common irhut 3 Gaattce (2) NATURE OF INPUT USED h l 4 mht => a VC (a) If production of a product requies tii ea), commonly used to produce other Product.it will have more elastic supply as change in price will shift input from one to another use (b) If production of a product requires specialised input that are not commonly used to Produce other product,it will have inelastic supply tre > emelostic age (3) NATURAL CONSTRAINT :: ‘Goods whj4n depends more on nature have INELASTIC rainfall temperature ete. : SUPPLY eg agriculture products which depen hte 0 elu she (a) if production of a product requigesitechni complex and needs large stock of capital,then supply of good will be inelg6ttagas e changed easily AS dy off (5) RISK TAKING®: The elasticity of risk. if entrepreneurs are willing to take entrepreneurs hesitate to take risk, the su fepends uon the willingness of entrepreneurs to take k, supply will be more elastic. On the other hand, if (6)TIME FACTOR OR TIME HORIZON :: => Very short period :: Itis also calfed market period.Supply under such condition is perfectly inelastic and fixed upto level of stock available eg. perishable good having supply curve parallel to Y- axix r=) Short period :: In this production can only be increased by making full use of plant capacity but plant capacity cannot be altered as time period is short. Thus supply is elastic only to some extent ==> Long period :: In this production or supply can be adjusted according to the demand as additional factors( both variable as wells fixed) canbe employed or discarded.lt makes supply curve perfectlyelastic Time; Pets ws? e * A Nee be oe comptes tone whey or ne ontyuids panded ine ihe uate dermaSurly And Elaicty OFsupny Praveen Jungja (98960-34231) Page 142 N.C. E: R. T QUESTIONS AG) Whatis meantby tw ofsupply? P41. Qsf RL Qsal- OTE IAF PAY attr goo d je in quantity suppfietf and change in supp 7/, Jot. : > Due to improvement of technology, the marginal costs of production a ions have gone How willitaftect the supply curve of television? my MIaA, 4 (Q2) Whatis Meant by chang: (94) Whateffect does.a change in input price have onthe supply curve? PTT P2l pa iza ® Sey 6D (Q5) What @ffect does imposition of unit tax (an increase in excise tax rate) have on supply curve the product ? Rg - 129 $06) If a farmer grows rice and wheat how will an increase in the prige of wheat affect the supply Curveofrice? — P uy fs SAwed deftwayd pi ry (Q7) Whatis meant by market period? vou 5 (Q8) inet dope Price elasticity of supply meas: juantify? 7 cha ek chaste é Y. m an (Q9) Whatis the price elasticity associated with as fine suf Sure pemmntt rede ti origin 2 (Q10) Give two examples where techn: progress leds to a shift in the supply curve. 6 fee (Q11) Anew technique of productionfte iced the marghqadéost of producing stainless steel How will this affect the supply curve of stl esssteplutensig? might wrcid Be 199 g the sea leVel, covers a lot office rege reduces 4 (C112) Because of cyclone ina céash the productivity of land. How will it affe ipply curve of rice of the region ? sed (Q13) Draw straight line supply curve with ( unitary (b) Es = zero a) yu . 114) Price (Rs/kg) Firm A Firm B Firm C Mafket (Q14) (Rsfkg} eA rie 45 a (a) Complete the table 37 B50 40 ‘$5 — 435 (b) Plot supply curve of each firm and the 50 44 454 market. What relationship do you observe 48 60 65 —17X_ between individual supply curve and the market supply curve ? aaona S & (c) Calculate Es of firm A when price rises from Rs2 to Rs 3 (® Whatis the supply curve of the firm in short run ?VUUUEYUHL YOYHY OY YD Db we” 2 @ @ & R = io os se fp eLre =% pa sy yo \50 5 suppl ly And Elasticity Of Supply Page 143 Praveen Juneja (98960-34231) (ai6 2 (eels fim cams, a revenue of Rs 50 when the market price of a good is Rs.10. The market price S15 and the firm now eams revenue of Rs 150. Whatis the Es ofthe firm's? © $= cat The market price: of a godd changes from Rs 5 to rs 20. As a result, the quantity supplies by | P g reases by ‘18.units, The Esis.5 eed i | and final output levels of the firm. a ee "7 Pet “y * ° . a 2) Atmarket price of RS 10, a firm supplies 4 units of outlt. 18 tharket price increases to Bs what quantity will the firm supply atnew price if Given Es=1.25 Gumey 1o° 4” ; was 3 {Q19) Difference between Stock and supply ? Pg “27 s ea Coney Dt = q (G20) why more is suppied at higher prices ? Rael! Nop “firen Cheat stock wy ; : (G21) Find and plot market supply Price FirmAFimB Mc ° ° 0° 0 1 oO Oo ° 2 0 0° © 3 1 0 oF 4 Be RAG, 5 3.4 4 6 441s SS 7 5 2 iz 8 6 25 8 ) Me he mar 1e following table shows the supply prereye (Q22) There are three indentical, schedule of firm 2 . Compute the 7g Price('s) SS\(units). WB RS ° 0 1 0 fe) 2 2 6 3 4 2 4 6 1g 5 8 2y 6 40 40 7 12 3b 8 14 Sr