MARKET SUPPLY

What is Market Supply ?

Market supply shown the quantity of commodity at each price for a given
period of time
Supply is the quantity of a good or service that a producer is willing and able
to supply to the market at a given price in a given period of time
The law of supply establishes a direct relationship between price
and supply. Firms will supply less at lower prices and more at higher
prices
A supply schedule is a statement of the various quantities of a given
commodity offered for sale at various prices per unit of time.
With the help of the supply schedule, a supply curve can be drawn
Normally as the market price of a commodity rises, producers will expand
their supply into the market & reduce when at the lower price
*When the market price, it becomes more profitable for businesses to increase their
output
What causes a shift in the supply curve?
i) Costs of production

ii) Changes in production technology

vi) The number of producers in the
market

v) Change in the price of a substitute

iv) Climatic conditions

iii) Government taxes and subsidies

Supply schedule and Supply curve
Price(RM) Qty
supplied
in dozens
4 3
6 6
8 9
10 12
With the help of the supply schedule, we can
construct supply curve
It is seen that when the price is 4 three
dozens are offered for sale.

As the price increases, the quantity supplied
also increases
Movement along the supply curve or expansion and
contraction of supply curve
-When more units are supplied at a higher price, it is
called expansion of supply.

-When fewer units are supplied at a lower price,
it is called contraction in supply.
-When the price is OP, OA is supplied.

-When price increases to OP1, the producer will
supply OB units.

-The movement from OA to OB shows the expansion
in supply.

-Original price is OP and original supply is OA. When
price falls to OP2 the producer will supply OC units.

-The supply has contracted from OA to OC.
Increase or decrease in supply causes shifts in the supply curve. A shift in the supply
curve is due to a change in other factors other than the price of the commodity.

-At price OP, the supply curve before the change in other factors.

-S1 shows an increase in supply because at the same price (OP) is offered for sale ie.
(OT1)
-S2 shows decrease in supply because at the same price (OP)less is offered for sale
(OT2)
Shifts in supply (or) increase or decrease in supply
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