SUPPLY

Paul Joshua O. Cual

 LEARNING OBJECTIVES
• Define and explain the difference between
supply and quantity supplied.
• Define and explain the law of supply.
• List and explain things that cause a supply
curve to shift to the left/right.
• Learn the determinants of Supply.
SUPPLY

Supply is a fundamental economic

concept that describes the total
amount of a specific good or service
that is available to consumers.
-Investopedia
LAW OF SUPPLY
- The relationship between price and
quantity in supply is directly
proportional.
- As price increases, quantity
supplied increases while as price
decreases, QS decreases.
Table 3: SUPPLY SCHEDULE OF TSHIRTS
FOR THE MONTH OF NOVEMBER 2018

PRICE QUANTITY SUPPLIED

(P) (QS)

100 165

75 125

50 75

25 25
Supply Curve
PRICE
120

100

80

60

40

20

0
25 75 125 165

QUANTITY SUPPLIED
Linear Supply curve
Example of linear supply curve
A linear supply curve can be plotted using a simple
equation

P = a + bS
a = plots the starting point of the supply curve on the Y-
axis intercept.
b = slope of the supply curve.

P = 30+0.5(Qs)
Linear Supply curve

Example of linear supply curve

P = 30+ 0.5(QS)
 How does a supply curves move?
A supply curve shifts whenever a
factor that affects the supply of the
good (other than price) changes
RIGHT: Increase in supply (at all
prices)
LEFT: Decrease in supply (at all
prices)
Shift in slope of supply curve
P = 30+ 1.2(QS)
Shift in a – Shift in the supply curve
P = 0 + 1.2 (Qs) shifts the supply curve downwards so
it starts at the 0,0
NOTES IN LAW OF SUPPLY
 The movement of the entire supply
curve brought about by change in its
determinants.
 A movement along the supply curve
brought about by the change in price.
 A downward supply curve is called a
decrease in QS; an upward supply
curve is called an increase in the QS.
DETERMINANTS OF SUPPLY

• “P.I.G. T.O.E.S”
– P roductivity
– I nputs
– G overnment Actions
– T echnology
– O utputs
– E xpectations
– S ize of Industry
PRODUCTIVITY
– P roductivity (workers, machines, and/or assembly)
SCENARIO #1
Our Xbox factory finds out that our
workers are getting a 25% pay raise
(increase in the cost of labor)…

What happens to the supply curve?

Supply Curve for Xbox 360
S
$500 S

450
Price per Xbox

400

350 Increase in labor pay =

more production costs
300
= decrease in the # of
250 S Xboxs

200
S

0 30 40 50 60 70 80 90
Quantity Supplied
in Billions of Xboxes per Year
 INPUTS
– I nputs (Change in the price of materials needed to make
the good)
GOVERNMENT ACTIONS
– G overnment Actions (Subsidies and Taxes)
Effect of tax on supply curve
P = 0 +2Q

A specific tax will shift supply curve upwards by Php5.

After tax. The supply curve will be

P = 5+2Q

An Indirect tax will shift supply curve upwards by a

certain percentage. e.g. VAT = 20%

P = 0+2Q. After VAT will be P = 0+(2Q * 1.2)

Effect of Subsidy on supply curve
Suppose we have supply curve

P = 30+0.5Q

After subsidy of Php10

P = 20+0.5Q
 TECHNOLOGY
– T echnology (Improvements in machines and production)
SCENARIO #2
Our Xbox factory invents a
technology that produces twice as
many Xboxs in a day as before.

What happens to the supply curve?

Supply Curve for Xbox 360

$500 S
Increase technology =
450 more Xboxs produced S
= increase in the # of
Price per Xbox

400 Xboxs

350

300

250

200
S S

0 30 40 50 60 70 80 90
Quantity Supplied
in Billions of Xboxes per Year
OUTPUTS
– O utputs (Price changes in other products)
EXPECTATIONS
– E xpectations (outlook of the future)
 SIZE OF INDUSTRY
– S ize of Industry (Number of companies in the industry)
ARTICLE REVIEW

“Coffee demand high but supply is low”

Published and Updated : April 1, 2019
Published by : SunStar Philippines
DISCUSSION

• The Balutakay Coffee Farmers Association (BACOFA)

indicated that “With more coffee shops starting operations,
the demand for high-quality specialty coffees had also
increased although the current supply may not be able yet to
fully support the demand”

• BACOFA was able to produce 28, 000kg of specialty coffee

for the past years. Their coffees are being derived to coffee
shops in Manila, Iloilo, Bacolod, and Davao City. These are
also already exported to Japan.
REALIZATION

• According to BACOFA “We realized that the demand is really

not a problem as long as we make sure that we are
producing quality and deliver well-selected beans to our
clients. There is the market, we just lack the good supply.
Sometime we cannot already cater to all the demands
because we do not have enough supply”

• "In order to really have good-quality coffee beans, we

observe religious application of fertilizer, spraying, and
pruning. Roughly, we spend about P12, 000 to P15, 000
maintaining the trees per week. This excludes the fertilizer
and other stuff needed"
SOLUTION TO THE PROBLEM

• In a bid to help out with the problem, NGOs such as

Acdi/Voca had been training coffee farmers to produce and
process better coffees. Currently, Bacofa cooperative has 78
members but Dubria said they are expecting 150 more who
had completed the training conducted by Acdi/Voca.
THANK YOU!!!

Any Questions?