Prepared By Ali Siddiqi

SUPPLYSupplyLaw of SupplyDeterminants of SupplyEquilibrium Surplus and Shortage

Prepared By Ali Siddiqi

The total amount or quantity of a good or product that producers are willing and able to sell at various prices (Schiller)

The total amount of output of goods and services in an economy (Sloman)

Supply

Prepared By Ali Siddiqi

Different Prices=Different Demand Different Prices=Different Supply Law of Demand: As the prices increase…. Law of Supply: As the price of the product or

service increases…suppliers will supply more.

Law of Supply

Prepared By Ali Siddiqi

Supply Schedule is a table showing the different quantities supplied at different prices

Supply Schedule

Table 2.2 : The supply of potatoes (monthly)

Price (pence per kg)

Farmer X’s supply (tonnes)

TOTAL market supply

(tonnes : 000s)

a 20 50 100

b 40 70 200

c 60 100 350

d 80 120 530

e 100 130 700

Prepared By Ali Siddiqi

A graph showing the relationship between the price of goods and the quantity of the good supplied over a period of time

Upward sloping Positively Slopped

Supply Curve

0 25

50

75

100

125

150

175

200

225

250

275

300

325

350

375

400

425

450

475

500

525

550

575

600

625

650

675

700

725

750

775

800

0

20

40

60

80

100P

rice

(pe

nce

per

kg)

Quantity (tonnes: 000s)

Supply

a

b

c

d

e

P

20 40 60 80100

Q

100200350530700

abcde

Market supply of potatoes (monthly)Market supply of potatoes (monthly)

Prepared By Ali Siddiqi

Capacity and technology Cost of production Random Events “Shocks” Expectations of Future Prices Prices of Substitutes and Compliments

Changes in Supply

Prepared By Ali Siddiqi

This is the point where supply equals demand.

At this point suppliers are supplying the same amount of products as demanded.

Agreement point

Equilibrium: Mr. Demand, Meet Mr. Supply

Prepared By Ali Siddiqi

On Board

Surplus and Shortage