Supply

Amity School of Business

• Supply: The (1) willingness and ability of sellers to produce and offer to sell different quantities of a good (2) at different prices (3) during a specific period of time. • Law of Supply: As the price of a good rises, the quantity supplied of the good rises; and as the price of a good falls, the quantity supplied of the good falls.

Supply Curve Amity School of Business .

Deriving a Market Supply Schedule and a Market Supply Curve Amity School of Business .

floods. Banking & insurance • Natural factors – rain. drought. fertility of land. climatic conditions. irrigation facilities. earthquake etc. . Communication.Factors affecting Supply Amity School of Business • • • • • • • • • • • Own Price Price of related goods Cost of Production State of Technology Goal & objectives of producer Number of Sellers Degree of competition Expectations of Future Price Taxes and Subsidies Government’s taxation and other policies Means of transportation.

other than commodity’s own price. This happens because of change in any of the factors affecting supply. .Amity School of Business Changes in Quantity Supplied versus Changes in Supply • Changes in Quantity Supplied: a movement along the supply curve. – Increase in supply: a shift to the right. This happens because of change in commodity’s own price. – Decrease in supply: a shift to the left. • Changes in Supply: a shift in the supply curve.

A Change in Supply versus a Change in Quantity Supplied Amity School of Business .

Amity School of Business Price Elasticity of Supply • A measure of the extent to which the quantity supplied of a good changes when the price of the good changes. Price Elasticity of Supply (Es) = % Change in Quantity Supplied % Change in Price • . and all other factors affecting supply remaining the same (ceteris paribus).

Price Elasticity of Supply Amity School of Business • • • • • Perfectly Elastic Supply – When the quantity supplied changes by a very large percentage in response to an almost zero increase in price Elastic Supply – When the % change in the quantity supplied > the % change in the price Unit Elastic Supply – When the % change in the quantity supplied = the % change in price Inelastic Supply – When the % change in the quantity supplied is < the % change in price Perfectly Inelastic Supply – When the quantity supplied remains the same as the price changes .

50 0 1 2 3 4 5 6 7 8 9 10 11 12 Demand Quantity of Ice-Cream Cones .50 Equilibrium 1.50 2.Price of Ice-Cream Cone Equilibrium of Supply and Demand Amity School of Business Supply 3.00 2.00 1.00 0.

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