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Supply
- Supply - A schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period.
- Law of Supply: Other things equal (ceterus paribus), as the price increases, the quantity supplied increases as well, and vice versa
- There is a direct relationship between price and the quantity supplied
- The higher the price, the less likely consumers will buy the product, as they see a high price as an obstacle.
- To the supplier, a higher price means more revenue, thus giving them incentive to create more quantities of the product.
- For the manufacturer, when the production goes beyond a point, they meet increasing marginal costs, and thus they will not produce the costly units unless it is sold for a higher price.
- There is a direct relationship between price and the quantity supplied
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The Supply Curve:
The supply curve is used to graphically represent individual supply. The curve on the right (S1) is an example of a supply curve, which uses the price and quantity data provided in the table.
The law of supply is demonstrated by the curve's upward slope; as the price of a good, service or a resource increases, producers will sell more of it.- This relationship between price and quantity suppled is positive, or direct.
- This relationship between price and quantity suppled is positive, or direct.
- Market Supply:
- Determinants of Supply (Supply Shifters) : STORES
- S-subsidies and taxes - Increase in taxes will reduce supply; increase in subsidies will increase supply.
- Subsidies = reverse tax = the government pays the producer money in return for a service provided by them
- For firms, taxes are costs
- Subsidies helps the suppliers,lowers production costs
- For example: The swiss government subsidising farmers to increase the supply of swiss farm grown goods. They also tax imports of food in order to reduce that supply.
- T- technology - technological improvements lowers production costs and increase supply, which enables firms to produce units of output with fewer resources.
- Seldom are there negative changes in technology.
- For example: The use of robots in factories costs less than the use of factory workers (wages are too high). The robots are faster and more "accurate" than workers.
- O- other related goods' prices (goods using the same resources) - If a substitute product's price is higher, the manufacturer will chose to produce it.
- For example: the manufacturer can chose to produce more expensive soccer balls and cheaper basketballs to derive greater profit.
- R- resource cost - When the resource prices increase, production costs will also increase, therefore the supply will be reduced. In contrast, if the resource price decreases, supply will increase because production costs will decrease.
- E- expectations for future prices - This is slightly ambiguous because even if the prices are expected to be higher in the future, the manufacturer might chose to manufacture less now and wait, or manufacture more now and sell them later.
- For example: If producers expect quantity demanded to increase in the future, then they would sell few currently at low prices, and sell many more in high prices in the future (since Qd will be high).
- S-size of the market - The larger the number of suppliers means greater market supply. The smaller the number of sellers means the market supply will be less.
- Changes in Supply: Changes in supply occur when any determinant of supply changes
- An increase in supply moves the curve to the right
- A decrease in supply moves the curve to the left
- Ex. Technology- improvements in technology increase supplies and vice versa
- Improvements allows firms to produce output with fewer resources
- ex) If a paper-making firm replace old machines with new ones that can make paper ten times as fast, the total output of the firm will significantly increase.
- Changes in Quantity Supplied: similar to changes in demand and changes in quantity demanded.
- a change in quantity supplied is when a change in price causes a movement of points along the same curve.
- Note that this can be changed by the shift of the demand curve (example below) or by a change in price.
- a change in quantity supplied is when a change in price causes a movement of points along the same curve.
Latest page update: made by Benji-Bucket
, Oct 1 2008, 9:49 AM EDT
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