S Kumaraperumal

Supply
Willingness and
ability of producers to
make a specific

Produced goodssupply depends not only

on decision to supply
factors of production
Also ability to produce it

quantity of output
available to
consumers at a
particular price over
a given period of time

Non-produced goods
more direct supply
factors

Law of Supply
More of a good
Price regulates quantity
will be supplied
supplied
at higher price
When price of goods rises,
when other
individuals and firms
factors constant
rearrange their activities
or less of a good
to supply more of that
will be supplied
good to the market
at lower price
Firms costs are constant,
when other
higher the price , higher
things constant
the profit leads to more
output

Supply Curve

Price of X
(Px)

Quantity of
X supplied

15

25

Supply

Determinants
Changes in the prices of

production inputs
Changes in technology
Changes in supplier
expectations
Changes in taxes and
subsidies
Changes in interrelated
supply (supply of cheese and
butter)

Shift factors of
supply
Changes of inputs used in
production of goods
Changes in technology
Changes in suppliers
expectations

Cost of inputs like land, labour and

capital have major influence on

supply
(increase in cost of production will
reduce the ability of producers to
purchase factors of production at
any given price for their product)
supply curve will shift to left

Changes in taxes an subsidies

Some goods are in joint supply;

variation of one will alter other
Events beyond human control Some goods or competitive supply;
when they use same raw materials
Any change in price causes
Changes in interrelated
products

movement along the supply

curve

Good /bad harvest, natural disasters

Supply curve

Things to remember
Supply curve follows the law of

supply

When price increase and

quantity supplied also increase

The horizontal axis quantity-has

a time dimension
The quantities are same qualities
The vertical axis price is a
relative price
The curve assumes everything
else is constant
Effects of price changes are
shown by movements along the
supply
Effects of non-price determinants
of supply are shown by shifts of
the entire supply curve