Questions

1. What are the headline news all

about?
2. How do the headline news
describe the economy?
The behavior of Producers are examined
through supply.

It is necessary to know how the

producers react in every price increase
or decrease.
The Concept of
SUPPLY
 What is SUPPLY?
• The quantity of goods and services
which the supplier is willing and able to
sell at alternative prices at a given
time.
• Supply is also affected by the price.
• The producers and sellers are
considered as suppliers.
 Stock vs. Supply

• Stock is the quantity of output which a

seller has with him and has not yet
brought for sale.

• Supply is a quantity of output brought

from existing stock for sale at a certain
price in a market.
 Supply Schedule
• The Supply Schedule shows the
different quantities that are offered for
sale at various prices.
• The Supply Schedule may reflect the
individual schedule of one producer or
the market schedule showing
aggregate supply of a group of sellers
or producers.
 Hypothetical
Supply Schedule
and Rice
Price of Rice (Per Sack) Quantity Supplied Market
(50Kilos/Sack) The table indicates
that a seller offer a
200.00 250,000
big quantity of rice
175.00 200,000
supply in the market
150.00 180,000
when the price is
145.00 160,000
high and likewise,
130.00 120,000 sells only a few sack
120.00 115,000 of rice when the
price is low
 Supply Curve
• It is a graphical form or representation of
the direct relationship of price and
quantity of products.
The Law of Supply
 Determinants of Supply
• Technology

• Cost of Production

• Number of Sellers

• Taxes and Subsidies

• Weather & Climate

 Technolog
production ofy
• Improvement in technology enables more efficient
goods and services. Thus reducing
the production costs and increasing the profits. As a
result supply is increased and supply curve is shifted
rightwards. Since technology in general rarely
deteriorates, therefore it is needless to say that
deterioration of technology reduces supply.
 Cost of Production
• Since most private companies’ goal is profit
maximization. Higher production cost will lower
profit, thus hinder supply. Factors affecting
production cost are: input prices, wage rate,
government regulation and taxes, etc.
 Number of Sellers

• Greater the number of sellers, greater will be

the quantity of a product or service
supplied in a market and vice versa.
• For example, when more firms enter an
industry, the number of sellers increases thus
increasing the supply.
 Taxes and Subsidies
• Taxes reduces profits, therefore increase in taxes
reduce supply whereas decrease in taxes increase
supply.
• Subsidies reduce the burden of production costs
on suppliers, thus increasing the profits.
 Weather
• Production of goods also depends on
weather conditions. A business man will
produce more sweaters during cold season,
more umbrella during rainy seasons and light
clothing during summer.
 Seatwork
1. Why is knowledge about supply
important? (3 sentences)
2. How does the change of supply
affect your life? (3 sentences)
 Supply Elasticity
It measures responsiveness of the
producer or sellers to price change.

It is classified into three:

- Elastic (Value is more than 1)
- Inelastic (Value is less than 1)
- Unitary (Value is equal to 1)
 Inelastic Supply Curve
- a change in price causes a smaller percentage
change in supply
- if the price of a commodity drops twenty-five
percent and supply decreases by only two
percent, supply is said to be inelastic.
Factors that make supply inelastic
• Firm operating close to full capacity. 
• Running out of raw materials.
• Limited factors of production. 
 Elastic Supply Curve
- The change in quantity supplied is greater than the
change in price.
- As the price increases to one percent, the supply
increases more than one percent.
An example would be a product that’s easy to
make and distribute, such as a fidget spinner. The
resources to make additional spinners are readily
available and the total cost would be minimal to
ramp production up or down.
 Unitary Supply Curve
- Same changes in price and quantity supplied
- If the increase in price is 5%, increase in supply is also
5%
 Supply Schedule
POINT Qs Price
A 0 5
B 120 7
C 300 10
D 420 12
E 600 15
F 780 18

To get the Qs, substitute any change of price in the P of the equation.
Given Equation: Qs = -300 + 60P
Example: -300 + 60(5) = -300 + 300 = 0 ; -300 + 60(7) = -300 + 420 = 120
To get the P in the equation, 120/60P = 2P , then add the first given price of 5.00, 2+5= 7
Another example: 180/60P = 3P, then add the first given price of 7.00, 3+7 = 10
 Seatwork
POINT Qs Price
A
B 18
C 100
D 140
E 25
F 28
G 300

Supply Function: Qs = -300 + 20P