Biala

KWARA STATE UNIVERSITY,
MALETE
FACULTY OF HUMANITIES MANAGEMENT AND SOCIAL
SCIENCE
DEPARTMENT OF BUSINESS AND ENTREPRENEURSHIP
COURSE CODE: ECN 201

COURSE TITLE: MICROECONOMIC ANALYSIS
SUBMITTED BY:
POPOOLA JOHN OLUWASEUN
22D/7BA/137
LECTURER IN CHARGE:
DR. M. I. BIALA
ANALYSIS OF SUPPLY
Meaning of Supply
Supply is defined as the total amount of a given product or commodity a supplier offers to
consumer at a given period and a given price level. In general, producers are willing to sell
their product for a price as long as that price is at least as high as the cost of production of an
additional unit of a product.
The willingness to supply, called the SUPPLY FUNCTION. Depends on the price at which
the good can be sold as well as the cost of production for an additional unit of the good.
The buyers demand for goods is not the only factor determining market price and quantities.
DETERMINANT OF SUPPLY
1. Price of commodity
2. Price of related item
3. Technology intervention
4. Cost of production
5. Government policies
6. Natural conditions
7. Number of suppliers
8. Expectation for future prices
THE LAW OF SUPPLY
The law of supply stated that a higher price leads to a higher quantity supplied and that a
lower price leads to a lower quantity supplied. Supply curves and supply schedules are tools
used to summarize the relationship between supply and price. There is a positive relationship
between price and quantity supplied, leading to an upward – sloping supply curve. Supply
curve sellers like to make money, and higher prices mean more money.
Similarly, as price decreases, the quantity supplied decreases. All other factors being equal.
Change in Quantity Supplied Vs Change in Supply
A change in quantity supplied is the change in the quantity a producer is willing to supply
when there has been a change in the market price of the good or service it sells.
It is a situation which is due to rise or fall in the price of a commodity/service and it is

described by a movement along the existing supply curve.
A change in supply on the other hand is defined as an increase or decrease in the supply of a
commodity caused by various related factors. It is a movement or shift in an entire supply
curve resulting from a change in one of the non-price determinants of supply.
Factors that causes a supply to change.
There is a consensus among economist that there are various primary factors that cause
supply to change.
a) Price of raw materials

b) Seller expectations
c) Number of sellers in the market.
Types of Supply
a. Short-Term supply: This explains that the ability of a purchaser to buy goods is
constrained by the available supplies. Buyers cannot purchase beyond the supply
products.
b. Long-term supply: explains the factor of time availability. Whenever the demand
changes meaning, the availability of time gives the supplier a lee way to adjust to a
sudden shift in demand.
c. Joint supply: Explains the consequential supply, For example lamb production
affects meat and wool supply. In case farmers reduce farming lambs, meat and wool
supply will go down too. Similarly, an increase will result in the opposite effect.
d. Market supply: Explain the overall willingness and ability of all suppliers to supply
the market a particular product on a day to day basis.
e. Composite supply: Is used to explain the supply of products that serves more than
one purpose. A perfect illustration is the mining of crude oil. The production of oil
affects the manufacturing of petrol, gas, kerosene, diesel e.t.c
Ways of representing the law of supply
 Supply schedule
 Supply curve
 Algebraically
 Supply function.
 Supply schedule: a tabular representation of the law of supply/quantity supply at each

price. It shows the quantity supplied at different price in a market. This information can
be used by producers and manufacturers to understand what products are required in the
market and what price they need to change. Sometimes the supply curve is called a supply
schedule because it is a graphical representation of the supply schedule.
 Supply curve: it is a graphic representation of the correlation between the cost of a good
or service and the quantity supplied for a given period. A supply curve is usually upward-
sloping reflecting the willingness of producers to sell more of the commodity they
produce in a market with higher prices. Any change in non-price factors would cause a
shift in the supply curve, whereas changes in the price of the commodity can be traced
along a fixed supply curve.
 Supply function: it is a numerical portrayer of the of the association between the amount
expected, (quantity demanded) of a product or services, its value, and other related
factors, for example related products costs and input costs. A supply function has
numerous individual dependent variables and independent variables. We can better
represent the supply function in the form of the following equation:
SX= f (Px, PI, T, W, GP)
Where,
SX= supply of commodity x
Px = Price of commodity x
PI = Price of Inputs
T = Technology
W = Weather conditions
GP = Government Policy
REASONS FOR THE LAW OF SUPPLY
The main reasons for the operation of the law of supply are:
1. Profit Motive: The basic aim of producers while supplying a commodity is to ensure
maximum profits. When a price of a commodity increases without any change in costs it
raises their profits. So producers increase the supply of the commodity by increasing the
production.
2. Change in number of firms: a rise in price induces the perspective producers enter
into the market to produce the given commodity so as to earn higher profits. Increase in
number of firms raises the market supply.
3. Change in stock: when the price of a good increases, the sellers are ready to supply
more goods from their stocks. However, at a relatively lower price, the producers do not
increase big quantities from their stocks they start increasing their inventories with a view
that price may rise in near future

Biala

Uploaded by

Copyright:

Available Formats

Biala

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Biala

Uploaded by

Copyright:

Available Formats

KWARA STATE UNIVERSITY,

DEPARTMENT OF BUSINESS AND ENTREPRENEURSHIP

COURSE CODE: ECN 201

THE LAW OF SUPPLY

Change in Quantity Supplied Vs Change in Supply

It is a situation which is due to rise or fall in the price of a commodity/service and it is

a) Price of raw materials

Ways of representing the law of supply

 Supply schedule: a tabular representation of the law of supply/quantity supply at each

SX= f (Px, PI, T, W, GP)

SX= supply of commodity x

REASONS FOR THE LAW OF SUPPLY

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.