Consumers, Firms and Markets

Supply Analysis

Veena Pailwar
Professor
IMT, Nagpur
 Supply: A
Definition

Supply is the quantity of a commodity that a

supplier is willing to supply at a given price
during a given period.
Formats for the Representation of
Supply and Price Relationship

• Supply Schedule (Table)

• Supply Curve

• Supply Function
What motivates the supplier to supply a
commodity?
 A Supply Schedule and A Curve
Supply Schedule Supply Curve
Price of Quantity
Orange supplied
(per (units per
unit) time period)

10
Supply Schedule: A Hypothetical Example

Price of Quantity
Orange Supplied
(Rs/ Unit) (Units Per
time period)
10 110

9 90

8 70

7 60

6 40
 Supply Function
A Supply Function includes all those variables
that influence the quantity supplied

Q = g( P, Pi, T, E )
+ - - -

P : Price of the good

Pi: Input prices
T: Tax
P: Producer expectations
Division of A Supply Space
 Some facets of a Supply Curve
Rs/Q

Able to
The highest quantity
Supply of a good at each
price the firm is
profitably able to
Unable to supply, ceteris
Supply paribus.

Q/time unit

Law of Supply
The supply curve is
upward sloping
Change in Quantity Supplied Vs Change in Supply

Change in Quantity Supplied Change in Supply

A Change in Quantity Supplied

Price A to B: Increase in quantity supplied

S0
B
20

A
10

5 10 Quantity
 A Change in Supply
S0 to S1: Increase in supply
Price

S0

S1

5 7 Quantity
The Market Supply Hamam Lifeboy Market
Curve is the horizontal sum
of supply curves of firms

110 120 7

Price Quantity Quantity Quantity

Supplied Supplied Supplied
Hamam Lifeboy Market
10 110 120 230
9 90 100 190
8 70 90 160
7 60 80 140
6 40 60 100
 Producer Surplus

• The amount producers receive in excess of the amount

necessary to induce them to produce the good.

Price
S0
P*
Producer
Surplus

Q* Quantity