Quantity supplied is the amount of the good that suppliers are willing to supply at each price Market Supply is the sum of all producers quantities supplied at each price Supply can be shown using a supply schedule or supply curve ID: 653315
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Slide1
SupplySlide2
Supply
Supply:
is the relationship between the various possible prices of a good and the quantities of the good that suppliers are willing to supply
Quantity supplied is the amount of the good that suppliers are willing to supply at each price
Market Supply:
is the sum of all producers quantities supplied at each price
Supply can be shown using a supply schedule or supply curve
Supply Schedule:
is a list of quantities supplied at different prices, holding everything else constant.Slide3
Supply Curve
Supply Curve:
is a graph showing the relationship between the quantities supplied and the price of a good or service
Example;
Market supply curve for StrawberriesNote: A change in the quantity supplied means that there is a movement along the supply curve (for instance, from D to E)
Price ($ per kg)Quantity Supplied (kg per month)Point on Graph1.505D2.009E2.5013FSlide4
Law of Supply
Law of Supply:
as price increase, quantity supplied increases, ceteris paribus.
A direct (positive) relationship exists between the price of a good and the quantity supplied.
This means that the supply curve slopes upwardSlide5
Change in Supply
A change in
quantity supplied
is caused by a change in price
This means that there is movement along the supply curve, but the supply curve doesn’t shiftChange in Supply: a change (an increase or decrease) in supply means that there is a change in the quantity supplied of a good at any price levelOccurs if any other determinant (other than the price of good ) changes. A change in supply leads to a shift of the supply curveSlide6
Increase/Decrease in Supply
Increase in supply
shifts the supply curve down and to the right
Decrease in supply
shifts the supply curve up and to the leftSlide7
Determinants of Changes in Supply
There are six main factors that can cause a change in supply for a good
1) Number of Suppliers/Producers
2) Resource Prices
(Input prices or Factor prices)An increase in input prices causes a leftward shift of the supply curveA decrease in input prices causes a rightwards shift of the supply curve3) State of TechnologyAn improvement in technology causes a rightward shift of the supply curveSlide8
4) Changes in Nature and Environmental Factors
Example;
High temperatures, floods, or an earthquake can reduce the supply of many goods, especially agricultural products
5) Prices of Related goods
The supply of a good can be influenced by the prices of related goodsExample; If an automobile assembly line can produce either sports cars or sedans, the quantity of sedans produced will depend on the price of sports cars and vice versa6) Supplier ExpectationsIf suppliers expect the price of the item they sell to change in the near future, this affects the goods current supplySlide9
Changes in the Number of Suppliers
An increase in the number of suppliers will cause a increase in supply. This means that the supply curve will shift to the right
A decrease in the number of suppliers will cause a decrease in supply. This means that the supply curve will shift to the left
Price
($ per kg)
Quantity Supplied (millions of kg)S2S0S12.501113152.0079111.503
5
9Slide10
Supply Relationships
Variable
Change in Variable
Change
in Supply
RelationshipPriceIncreaseIncreasePositivePrice of Substitute producer goodsIncreaseDecreaseNegativeInput PricesIncreaseDecreaseNegativeTaxesIncreaseDecreaseNegativeSubsidies
Increase
Increase
Positive
Technology
Increase
Increase
Positive
Weather
Improves
Increase
Positive