Market Forces Supply

Supply

Supply is a schedule or curve showing the amounts of a

product that producers will make available for sale at each of
a series of possible prices during a specific period.
• The Law of Supply states that, all else equal, as price rises,
the quantity supplied rises, and vice versa.
 Supply

A curve illustrating the positive, or direct

relationship between the price of a product
and the quantity supplied of it, other things
equal, is the supply curve.
• It slopes downward to reflect the Law of Demand.
Supply
 Supply

• Market supply is derived from individual supply by

“horizontally adding” the supply curves of the individual
producers.
• Determinants of supply are those factors that cause supply
to change.
• The basic determinants of supply are (1) input prices or resources
prices, (2) taxes and subsidies, (3) technology, (4) the number of
sellers in the market.
 Changes in
Quantity Supplied
A change in quantity supplied is a movement
from one point to another point on a fixed
supply curve.
• The cause of such a movement is a change in the
price of the product being considered.
Supply
• Supply mean
• Willingly to product or
• Available
• Why people willing to produce cause they to receive .
• Receive more
•  supply more  increase in supply
• Receive less
•  supply less  decrease in supply
• Increase in Price of product can leads to receive more. Therefore ,
• when price increase , supply more.
• Decrease in price of product results receive less. So….
Supply

• Variables that can shift the supply curve

1. Input Prices
2. Technology (no of unit produce) MOVE
3. Number of sellers

Changes in price of the

price of the product is
movement along the
supply curve

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• You are selling soimai with 20 php . That time 1 kg of port is 250PHP
• Now you did not change price from 20 PHP. But pork 1 kg become 400 php

• You have more profit now or less profit now.

• Less profit
• Then your willingness to sell will excited/ more or Less
• Less
• Less supply
• Due to increase in input price.
• Which mean changes at the price of inputs will make your supply
changes . But the changes in quantity is not because of the price changes .
So it is shift .
• You are selling burger with 25 php. The sandwich bread price become
3php per piece from 5 php per piece.
• So input Cost reduced or increased
• Decrease
• Leads to profit
• Increase or decrease
• Increase in profit
• When profit increase , supply
• Supply increase –
• Shift to right
• You are selling burger with 25 php. The oil use to fry the meat become
100 per bottle from 80 per bottle
• So input Cost reduced or increased
• Increase
• Leads to profit
• Increase or decrease
• decrease in profit
• When profit decrease , supply ?
• Supply decrease –
• Shift to left
• Input price increase – supply shift to left
• Input price decrease – supply shift to right
Input Prices

• Increased prices usually increases profits, which is the main

incentive for sellers to produce more. Therefore, the effect of the
supply price depends also on resource (aka input) prices. If
resource prices increase faster than supply prices, then
producers will have less incentive to produce more. Likewise,
when resource prices fall, then profits increase for the same
price level, so sellers will produce more.
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. Therefore increase in subsidies increase supply
and decrease in subsidies decrease supply.
Technology
• Production.
• When the production increase because of technology.
• The cost goes down
• When cost goes down profit?
• Increase in profit
• Profit increase – supply will be?
• Increase .
Technology
• In your soimai shop there are 4 steamers.
• One steamer broke down…
• Production increase or decrease
• Production decrease , leads to profit ?
• Profit decrease
• Profit decrease supply will be ?
• Supply decrease and shift to left
• But if you buy new steamer ? Supply
• Shift to right
Technology
• Production increase – new machine  supply increase
• Production decrease – machine broke down supply decrease
Technology
• Technology changes have a direct impact on the cost of production. If suddenly
a new innovation allows you to cut your work time in half, you will cut down
your costs of labor. If technology allows you to conserve wasted resources,
then your input prices will decrease, These changes will increase supply,
shifting the curve to the right.
• Technological Decay is a less common case where technological progress is
reversed. What if the city banned the use of a certain cupcake icing
machine because the noise was bothering other residents? This would cause
you to go back to the less efficient practice of icing by hand, thereby increasing
your costs. In summary:
• Improvements in technology will lower costs of production and increase supply
• Decay in technology will increase costs of production and decrease supply
Number of seller
• More seller – more supply shift to right
• Less seller – less supply shift to left
• The number of seller or producer will have effect on the market supply
, since the market supply is the sum of the supply of each individual
seller –
• When more firms enter the market, supply will increase
• When firms leave the market, supply will decrease
Supply Increase in supply Shift right Increase in supply Shift left

Input price Decrease Increase

Tax Decrease Increase
subsidiary Increase Decrease
Technology Improvement Tech Decay
Number of Seller More increase Less decrease
• You have ice cream shop. Identify the effects which results the
changes in quantity supply and identify the move or shift.
• 1. When the price of milk goes up by 20%.
• 2. When the owner bought additional ice cream machine.
• 3. When near by ice-cream shop closed down.
• 4. When the government reduced the VAT .
• 5. When the sugar price decrease.
• 6. When the one of the machine broke down.
• 7.When the butter is buy one take three.
• ANSWER
• You have ice cream shop. Identify the effects which results the changes in quantity supply and identify the
move or shift.
• 1. When the price of milk goes up by 20%.
• Input Price . Shift. Shift to the left
• 2. When the owner bought additional ice cream machine.
• Technology. Shift. Shift to the right
• 3. When near by ice-cream shop closed down.
• Number of seller. Shift. Shift to the left
• 4. When the government reduced the VAT .
• Input Price . Shift. Shift to the right
• 5. When the sugar price decrease. .
• Input Price . Shift. Shift to the right
• 6. When the one of the machine broke down.
• Technology. Shift. Shift to the left
• 7.When the sugar is buy one kg take three kgs.
• Input Price . Shift. Shift to the right