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SUPPLY  Individuals control the factors of production – inputs. or resources.  Individuals supply factors of production to intermediaries or firms. necessary to produce goods. .

SUPPLY The analysis of the supply of produced goods has two parts: – An analysis of the supply of the factors of production to households and firms. . – An analysis of why firms transform those factors of production into usable goods and services.

other things constant.THE LAW OF SUPPLY  There is a direct relationship between price and quantity supplied. Quantity supplied rises as price rises. . Quantity supplied falls as price falls. other things constant.

THE FACTORS OF LAW OF SUPPLY The law of supply is accounted for by two factors: – When prices rise.Assuming firms’ costs are constant. . firms substitute production of one good for another. . a higher price means higher profits.

THE SUPPLY CURVE  The supply curve is the graphic representation of the law of supply. .  The slope tells us that the quantity supplied varies directly – in the same direction – with the price.  The supply curve slopes upward to the right.

SUPPLY CURVE Price (per unit) S PA A 0 QA Quantity supplied (per unit of time) .

A shift of supply curve outwards to the right will mean an increase in supply at the same price level. The supply curve may move inward or outward. When factors other than price affect the supply it results in the shift of supply curve. When the supply curve moves inwards to the left it means that less is being supplied at the same price level. .SHIFTS IN SUPPLY VERSUS MOVEMENTS ALONG A SUPPLY CURVE .


PY.F.O.N.policy  . C.T.SUPPLY FUNCTION Sx = f(PX.G) The amount of good supplied depends on a number of factors  Product price  Prices of related goods  Costs and technology  Objectives of the firm  Future expectations  Weather conditions and other short term factors  Changes in govt.W.

DETERMINANTS OF SUPPLY          The various factors influencing supply are: Production technology Prices of factors Prices of other products Number of producers or firms Future price expectations Taxes and subsidies Non –economic factors Natural factors .

 Production technology state of production technology affects the supply function. This will result in a decrease in supply. If advanced technology is used in the country. Prices of factors when the prices of factors rise. large scale production is possible. cost of production will increase. .

An increase in the price of other products will influences the producer to shift the production in favour of the product. the supply of the product will increase in the market….. . Number of producers or firms if the number of producers producing the product increases. Prices of other products Any change in the prices of other products will influences the supply.

Supply will be reduced. Taxes and subsidies if tax is imposed by the government on the inputs of a commodity. cost of production will go up. they will not supply their products at present. Future price expectations if producers expect that there will be a rise in the prices of products in future. .

. Non –economic factors Non-economic factors like war. political climate and natural calamities create scarcity in supply.