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Presentation On Supply

Paras AgarwalPranay ReddyHaswant ReddyShahidAbhilash Manikanta Yadav

Supply & Its Features

Def. Of A Supply :

Supply is the quantity of a commodity that the producer is writing to sell in the market at a given price in given period of time

Features Of Supply :

Supply is always expressed in terms of price.

Supply is a flow because it is measured over a period of time

Supply Schedule Individual supply

schedule

Def. It is defined as a table which shows various quantity of commodity. which an individual producer offers for sale during a given period of time at, different prices

Market supply schedule

Def. It is a table which shows various quantity of commodity that all the firms are willing to supply at each market price during a given period of time

Law Of Supply & Supply Curve The fundamental principle of Law

Of Supply is that - Supply of any commodity is directly proportional to Price of that commodity.

That means, as the price of a good increases, suppliers will attempt to maximize profits by increasing the quantity of the product sold. 

₰ Note :

≡ Main assumption of law of supply is cetris paribus i.e. other things remaining the same.

≡ Other assumptions are

≡ (i) price of related goods should remain same

≡ (ii) goal of the firm should not change, (iii) input prices & taxation policies should remain same.

100 200 300 400 500 600 700 800 900 10000

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Supply Units

Pri

ce O

f U

nit

s

Factors Affecting The Supply

Price of the commodity Price of related goods Goals of the firm Input price/ factor price/ cost of

production State of technology No. of producers

Future expectations regarding change in price

Taxes & subsides Natural factors Means of transport &

communication

Reasons For Supply Curve Moving Upwards

Price & quantity relationship

Entry of new firms Goal of earning higher

profit

Change (Or) Shift Of The Supply Curve

ж Def. Change in the supply means change in total, shift of supply curve takes place due to change in the factors other than the product price.

There are two types of movement.

(a) Increase (b) Decrease

When the supply of a commodity increases. due to favorable changes in factors other than the price of the

product it is called increase in supply. In such a case there is a

rightward shift of the supply curve

When the supply of the commodity decreases due to some unfavorable changes in

the factors other than the price of the goods the supply curve

shifts to the left ward

Y S S1 Price P S S1 Increases O Q Q1 X Qty

Y S2 S Price P S2 S Decrease O Q Q1 X Qty

Movement Along The Supply Curve

ж Def. Change in quantity supplied due to change of the price in same given supply curve of the commodity.

There are two types of movement of it.

(a) Extension (b) Contraction

refers to increase in quantity supplied due to rise in the price

of good. It is an upward movement on the same supply

cure

refers to decrease in quantity supplied due to rise in the price

of good. It is an downward movement on the same supply

cure Y S Price P3 Extension P1 P2 S Contraction O Q2 Q1 Q3 X Qty

Reasons For Supply Curve Moving Downwards

Obsolete technique of production

Increase. in price of related goods

Increase. in cost of production Decrease. In no of firms

Exceptions To Law Of Supply There are two exceptions to law of supply. They are,

(a) A Vertical Straight Line (b) Backward Sloping Curve

Supply Curve

It happens in the case of highly perishable commodity. supply for

which cannot he increased or decreased due to their highly

perishable nature for example- fish, milks and milk products, leafy

vegetables etc.

This type of supply curve might occur in the case of Laborers in

terms of no of hours worked. In this case to some extent supply of

Laborer increases with increase in the wages but after a certain point supply of Labor starts decreasing even if the wages are increasing1.

Y S Price P3 P2 P1 P S O Q X Qty

S Y Wages W 5 W 4 W 3 W 2 W 1 O X Laboures L5 L1 L2 L3

Elasticity Of Supply & Factors Affecting It

Def. Elasticity of supply refers to responsiveness of quantity supplied to the change in its own price.

Factors Affecting Elasticity Of Supply :

☻ Time factor☻ Nature of the commodity☻ Production Capacity☻ Future price expectation☻ Nature of input☻ Behaviors of cost of production☻ Risk taking

Es = % Change in quantity supplied

% Change in price

Degree Of Price Elasticity Of Supply

Price Elasticity Of Supply helps producers to have a better understanding of its present and future supply outcome

If supply is elastic, producers can increase output without a rise in cost or a time delay

If supply is inelastic, firms find it hard to change production in a given time period.

Five Types Of P.E.S

Inelastic Or Less Than Unitary Elastic Supply

More Than Unitary Elastic OR Elastic Supply

Unitary Elastic Supply Perfectly Elastic Perfectly Inelastic

Perfect Inelastic [ PES = 0 ] Perfectly Elastic [ PES = ]

Y Price S P2 Es = 0 P S P1 S O Q X Qty

Y Price Es = ∞ P O Q Q1 Q3 X Qty

Example : Antique Goods In Auction Hypothetical Example : Sale Of Oxygen In Medieval Ages

Unitary Elastic Supply [ PES = 1 ]

More Than Unitary Elastic Supply [ PES > 1 ]

X S Price P Es = 1 P1 S O Q 1 Q2 Y Qty

Y Price P1 Es > 1 P O Q Q1 X Qty

Hypothetical Example : Wishes Granted By Genie To Aladdin In Arabian Nights In My Childhood

Hypothetical Example : Gold Ornaments On Special Occasions

Less Than Unitary Elastic Supply [ PES < 1 ]

Y S Price P1 P Es < 1 S O Q Q1 X Qty

Example :

Time Period

Very Short Period Short Period

Supply = Constant, Supply Curve Is Straight Line From X-Axis

Example : All Perishable Goods

Supply Curve In This Case Will Be Upward Sloping Originating From X –

Axis.Example : Fruits, Vegetables, Bakery

Products

Y S Price P3 P P1 P2 O Q X Qty

Y S Price S O X Qty

Long Period Very Long Period

Supply Curve In This Case Will Be Upward Sloping, Originating From Y –

AxisExamples : Clothes, Utensils Etc.

Supply Curve In This Case Is Almost A Horizontal Straight Line Originating

From Y – Axis.Example : Electronic Goods, Furniture

Etc.

Y Price ` S S O X Qty

(i) Y S Price S S O X Qty

Basic of diff. Stock Supply

1. Meaning Refers to the total amount of goods which producers & seller are ready do offer for sell at a particular point of time.  

Means quantity of commodity that are offered for sale in the market in given period of time at the given price

1. Dependence Stock Of the commodity mainly depends on a) Production of commodity .b) Procurement price c) Storage & transport cost

 

Supply Of a commodity. depends mainly on the market price of the commodity

1. Concept It has a stock concept i.e. stock refers to amount of a commodity. at a particular point of time

It is a flow concept i.e. it refers to the amount of a commodity during a period of time. 

1. Commodities In case of highly perishable commodity. stock & supply would almost he same since these items cannot be stoked for a long period.

In case of durable commodity. supply consists only a part of total stock

1. Objective The stock of any commodity. helps in checking fluctuations of market price.

Enables the firm to earn sales revenues

Difference B/W Stock & Supply

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