Supply Analysis

Meaning of Supply In simple words, supply is an amount of

goods and services which a seller is willing to sale at a given time period at a given price, other things remaining same. The term supply includes –

• Stock for sale• Readiness/willingness to sale• Given amount/quantity of goods and

services• Given price Given time period

Definition• Thomas - “The supply of goods is

the quantity offered for sale in a given market at a given time at various prices.”

• Anatol Murad, “The quantity supplied refers to the quantity of a commodity offered for sale at a given price in a given market at a given time.”

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•SUPPLY SCHEDULE Individual Supply Schedule

Price ( Rs.) Q.S. (Units)

1 10

2 20

3 30

4 40

5 50

Market Supply Schedule

Price (Rs) Firm A Firm B Market Supply

1 10 5 15

2 20 10 30

3 30 20 50

4 40 30 70

5 50 40 90

SUPPLY CURVE

• Individual Supply Curve• Market Supply Curve

Law of Supply In Law of Supply, the relation between

price and supply of a commodity is studied, whereas other factors remain constant. There is a positive relation between price and quantity supplied.

Qs =f (P)

•  Dooley - “The Law of Supply states that, other things being equal, the higher the price, the greater the quantity supplied or the lower the price, the smaller the quantity supplied.”

Assumptions:

• Prices of a particular commodity are changeable.

• Prices of related goods remain constant.• Methods of product will not change.• Technology is constant.• Cost of production is constant.• Size of industry or number of firms is same.• Taxation policy is constant.• Government policy is constant.

Tabular Explanation

Price ( Rs.) Q.S. (Units)

1 10

2 20

3 30

4 40

5 50

Factors Affecting Supply of Goods

QS = Quantity Supplied

P = Price of a commodity S = Subsidy PR = Price of related goods

TX = Tax

Pi = Price of inputs

GF = Goal of firms

SN = Number of suppliers

PE = Price Expectations

T = Technology GP = Government Policy

Change in Supply• Movement along Supply Curve1. Extension or Expansion of Supply2. Contraction of Supply

• Shifting of Supply Curve1. Increase in Supply2. Decrease in Supply