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Supply means the quantity of a commodity that its producers or sellers offer for sale at a given time at a given price. Market supply is the sum of supplies of a commodity made by all individual firms or their supply agencies.
Law of Supply
The law of supply states that quantity supplied is positively related to price. Other things remaining the same as the price of a commodity rises, its supply is extended and as the price falls, its supply is contracted.
Supply Function
It is a mathematical statement which states the relationship between the quantity supplied of a commodity and the factors affecting its supply. S=f (Pn , Pf ,T,G, S)
Pn =Price of a commodity Pf = price of factor inputs. T= Technology G= Government Policy S= Nature and size of the Industry.
Changes in Supply
Change in supply Increase and Decrease in Supply Extension and Contraction in Supply
Change in Supply
Extension and Contraction Increase and Decrease
When quantity supplied changes due to change in price, it is called extension or contraction of supply curve. Characterized by upward or downward movement along the supply curve.
When supply changes due to change in factors other than price, it is called increase or decrease in the price. Characterized by rightward or leftward shift in the supply curve.
Elasticity of Supply
It is the degree of responsiveness of changes in supply to change in price on the part of seller.
Es =
Es = 0
If the point on the arc supply curve is such that the tangent passes through the origin, the elasticity at the point will also be equal to unity.
3. Nature of the commodity: In case of perishable commodity e.g. apples, tomatoes etc., supply will be inelastic. Reasons: Supply cant be increased in a short period of time. These goods cant be stored. In case of durable commodities e.g. computer, car etc. , supply will be elastic. Reason: Excess of durable goods can be produced and stored.