SUPPLY

THE DEFINITION OF SUPPLY

Supply is a schedule or curve showing the various amounts of a product that PRODUCERS are willing and able to make available for sale at each of a series of possible prices during a specific period.

SUPPLY SCHEDULE

•A supply schedule shows the prices and related quantities produced for a product.

SUPPLY CURVE

•A Supply Curve shows the information from the supply schedule in the form of a graph.

The Supply Schedule and the Supply Curve are two different ways to show the same information.

LAW OF SUPPLY

• The Law of Supply states that there is a positive or direct relationship that prevails between price and quantity supplied. As price rises, the quantity supplied rises; as price falls, the quantity supplied falls.

THE DETERMINANTS OF SUPPLY

1. Change in Resource Prices

2. Change in Technology

*A decrease in the price of microchips increases the supply of computers; an increase in the price of crude oil reduces the supply of gasoline

* The development of more effective wireless technology increases the supply of cell phones.

THE DETERMINANTS OF SUPPLY

3. Change in Prices of Other Goods

4. Change in Producer Expectations

5. Change in Number of Suppliers

• An increase in the price of cucumbers decreases the supply of watermelons.

• An expectation of a substantial rise in future log prices decreases the supply of logs today

* An increase in the number of tattoo parlors increase the supply of tattoos.

CHANGES IN SUPPLY

Any changes in the Determinants of Supply will result in a in a new Supply Curve. Changes in things other than the price of the good or service will lead to the need for a new Supply curve to be drawn.

CHANGES IN QUANTITY SUPPLIED• It is a movement from one point to another point –

from one price-quantity combination to another – on a fixed supply schedule or supply curve. PRICE IS THE DETERMINANT that results in the movement along a supply curve.