BCom Notes Part I Economics Supply
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Supply
The Theory of Supply Supply is of the Scare goods. It is the amount of a commodity that seller are able and willing to offer for sale at different prices per unit of time.
OR
Supply is a Schedule of the amount of a good that would be offered for sale at all possible prices at any period of time.
e.g. a dog, a week and so on.
Supply
It refers to that quality of the commodity which is actually brought into the market for sale at given price per unit of time.
Stock
Stock means that total quantity of a commodity which exist in market but cannot be offered for sale at a short notice.
The Law of Supply
Sellers supply more goods or high price than they are writing at a lower prices. Keeping other factor constant
If the price of a commodity rises seller, supply more goods while if the price decreases than they will supply less keeping other factor constant.
It is formed that the direct relation between quantity and supply and we can easily understand by supply schedule and supply curve.
From the Supply curve and Schedule we observed that the supply curve is positively sloped means that is direct relation between price and supply of the commodity.
The Supply function can also be explained it.
Qxs = f(Px, Tech, Si, Fn, X, …..)
Where
Qxs = Quantity Supplied by commodity of x by the producer.
Px = Price of commodity X
Tech = Technology
Si = Supplies of Import……………… These are constant fact of production.
Fn = Feaditer of machine
X = Taxes / Subsidies
We can say supply is a function of
Qxs = f(Px)
Movement / Shift In Supply
According to the law of Supply that If the price increases supply increases so we can say that change in price curve change in Quantity Supply so movement along the curve happen at different price level while keeping other factor remain constant or we can say that there is movement along the curve is only price change and other factors remain constant.
When price is Pi Supplier offer Qi quality for sale while when price increases to P2 the offer Q2 which slow there is movement along the curve shift in Supply curve.
Where Ss = Actual Supply Curve
When price level Decrease due to other factors (Tech, Si, Fn, X, ….) the Actual Supply curve (Ss) shift upward to the left (Ss)
When price level increase due to other factor (Tech, Si, Fn, X, ….) the Actual Supply curve (Ss) Shift downward to the right (S2S2)
Non-Price Factor which can shift in Supply. These factors are
1. Change in Factor Prize
The rise or fall in supply may take place due changes in cost of production. If the input prizes which is used for making the commodity increases the cost of production.
2. Change in Technique
If there is improvement in technology then it will come reduction in cost of production.
3. Improvement in the Means of Transport
If there is improvement in communication in transport then if leads to minimize the cost of production.
4. Political Changes
The increase or decrease in supply also occurs due to political changes. If there is war in between two country then it will decrease the Supply.
5. Taxation
If Government received heavy taxes on the Import of a commodity then the Supplies of these goods is reduced at each price.
6. Good of Firm
If firm expect higher price the future they produce in large scale.
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