SUPPLY

 Similar to the law of demand,

supply is a function of price
and the other factors. This
section will examine how the
supply curve differs from the
demand curve and will cover
the elements that impact the
supply of goods.
 The Law Of Supply
 Under the same premise of scarcity and
efficient allocation of resources , the
quantity supplied of a product or service
is a function of its price. But in contrast to
the demand curve, which consider the
consumer’s perspective, understanding
changes in the quantity supplied requires
appreciating the standpoint of sellers and
producers.
TECHNOLOGY
 Firms nowadays have to keep a breast of the
latest innovations in order to compete and
stay one step ahead of their competitors. For
example, advancement in computer
technology has enabled firms to be more
profitable by increasing their efficiency and
reducing their costs of production
 In essence, technology aids manufacturers
either by minimizing delays in production or
by directly increasing labor productivity.
INPUT PRICE
 Recall the factors of production discussed
at the beginning of this unit:
land,labor,capital and entrepreneurship.
The efficient allocation of this resources
results and more profit from the suppliers,
point of view. Firms have to determined
the right balance of inputs to achieve
maximum returns. An increase in input
prices drives at costs. Higher cost lead to
a decrease in quantity supply.
 PRICE OF THE OTHER
GOODS
 Manufacturers often produce several products
in the same or related line.
PRODUCER EXPECTATION
 Producer
  who anticipates a surge (↑) in factor
prices tend to increase production before the
higher input prices become in effect. This
leads to an increase in quantity supplied (,).
For example, a cabinet maker who expects
the price of wood to increase in the coming
months will use his/her stock of wood now to
create as many cabinets as possible ( before
the costs of making a cabinet increases). The
cabinets that will be sold at the higher price
level will yield higher returns for the cabinet
maker.
Excise tax
 Is a tax imposed on a manufactured

good. Excise tax is applicable to

producers and sellers as opposed to
value-added tax(VAT) that is pad only by
consumers or end users.

Subsidy
 - Is monetary assistance by the

government in support of target

industries or sectors of the economy.
MARKET EQUILIBRUM
 A market is a meeting place for buyer and
sellers where the buyer can purchase
goods from the seller for a price that is
agreeable to both. In ecnomics ‘’markets’’
is not limited to physical location but also
include contempory, online platform that
is typical of the financial market.
SHORTAGE
 - Is represented by the shaded area under
the equilibrium price(P*). At market
price(P),quantity demanded exceeds the
quantity supplied in the market ().