Supply
In economic terms, supply is the amount of a certain product that the producers of that product are willing to sell. There are many factors that determine the quantity supplied but price is the main determinant.
Quantity supplied:
An example would be when the price that chocolate is sold is high then more chocolate is produced. This is because the producers of chocolate are willing to produce more of their product because they will receive a higher price. The producers will work longer hours and invest in better machinery because they want to meet the demand in the market.
However, when the price for pumpkins in the market is low it is producers may not see the production of pumpkins as profitable and may let staff go or even shut down the business altogether.
‘Because the quantity supplied rises as the price rises and falls as the price falls, we say that the quantity supplied is positively related to the price of the good.’ ;(Mankiw & Taylor,(2011:76)
Law of supply:
Is the relationship between price and quantity supplied. This means that when the price of a good rises then the supplier is more likely to produce more of that good and therefore the quantity of the good supplied also rises.
An example is shown in the graph below, in this graph it shows the quantity a cola bottle producer is prepared to supply at different prices. At €20 he is prepared to supply 30 bags of cola bottles. At any price below €10 he does not supply cola bottles. He is willing to supply more cola bottles as the price increases.
‘This is the supply schedule , a table that shows the relationship between the price of a good and the quantity supplied, holding constant everything else that influences how much the producers of the good want to sell.’; (Mankiw & Taylor,(2011:76)
Quantity supplied:
An example would be when the price that chocolate is sold is high then more chocolate is produced. This is because the producers of chocolate are willing to produce more of their product because they will receive a higher price. The producers will work longer hours and invest in better machinery because they want to meet the demand in the market.
However, when the price for pumpkins in the market is low it is producers may not see the production of pumpkins as profitable and may let staff go or even shut down the business altogether.
‘Because the quantity supplied rises as the price rises and falls as the price falls, we say that the quantity supplied is positively related to the price of the good.’ ;(Mankiw & Taylor,(2011:76)
Law of supply:
Is the relationship between price and quantity supplied. This means that when the price of a good rises then the supplier is more likely to produce more of that good and therefore the quantity of the good supplied also rises.
An example is shown in the graph below, in this graph it shows the quantity a cola bottle producer is prepared to supply at different prices. At €20 he is prepared to supply 30 bags of cola bottles. At any price below €10 he does not supply cola bottles. He is willing to supply more cola bottles as the price increases.
‘This is the supply schedule , a table that shows the relationship between the price of a good and the quantity supplied, holding constant everything else that influences how much the producers of the good want to sell.’; (Mankiw & Taylor,(2011:76)
Market supply versus Individual supply:
' Just as market demand is the sum of the demands of the demands of all buyers, market supply is the sum of the supplies of all sellers'; (Mankiw & Taylor,(2011:98)
Shifts versus movement along a supply curve:
A shift in the supply curve is caused by some other factor other than price change. the amount that sellers are willing to offer changer if any of these other factors change. when a shift happens on the supply curve it is referred to as an increase or decrease in supply.
Below is an example of a shift in the supply curve.
' Just as market demand is the sum of the demands of the demands of all buyers, market supply is the sum of the supplies of all sellers'; (Mankiw & Taylor,(2011:98)
Shifts versus movement along a supply curve:
A shift in the supply curve is caused by some other factor other than price change. the amount that sellers are willing to offer changer if any of these other factors change. when a shift happens on the supply curve it is referred to as an increase or decrease in supply.
Below is an example of a shift in the supply curve.
When price affects a supply curve it is known as movement along the supply curve. This is usually caused by change in demand in the market for this certain good.
There are many factors that can cause a shift in the supply curve. If the price of the other goods that go into making a product change then this can cause the price of the good supplied to change. For example the change in the price of milk can affect the cost of a bar of chocolate because milk is one of the main ingredients in this product.
Input prices:
When producing their product producers have a lot of inputs for example the production of chocolate requires many inputs such as milk, sugar, coca powder this along with the employees who work to produce the chocolate and the building that it is made in. If the cost of one of these inputs rises it makes the production of chocolate less profitable.
Technology:
Technology plays another major role in the production of a product. When there is advances in technology it can increase productivity and therefore more of the good can be produced.
The supply curve shows what happens to the quantity supplied of a gppd when its price varies, holding constant all the other variables that influence sellers. When one of these variables changes, the supply curve shifts. 'Mankiw & Taylor,(2011:80)
There are many factors that can cause a shift in the supply curve. If the price of the other goods that go into making a product change then this can cause the price of the good supplied to change. For example the change in the price of milk can affect the cost of a bar of chocolate because milk is one of the main ingredients in this product.
Input prices:
When producing their product producers have a lot of inputs for example the production of chocolate requires many inputs such as milk, sugar, coca powder this along with the employees who work to produce the chocolate and the building that it is made in. If the cost of one of these inputs rises it makes the production of chocolate less profitable.
Technology:
Technology plays another major role in the production of a product. When there is advances in technology it can increase productivity and therefore more of the good can be produced.
The supply curve shows what happens to the quantity supplied of a gppd when its price varies, holding constant all the other variables that influence sellers. When one of these variables changes, the supply curve shifts. 'Mankiw & Taylor,(2011:80)
Bibliography
Mankiw G.N & Taylor M ( 2nd edition) ( 2011) Economics, Cengage Learning