Dr.K.Baranidharan
Present by…
Engineering
Economics &
Financial Accounting
Ee&fa
218 August 2013
LAW OF SUPPLY
Law of Supply
• Law of Supply- refers to the relationship between price and
the quantity of a good or service that firms a...
Faculty of Business and Economics (FBE), The IIPM, New Delhi
SUPPLY
• Quantity Supplied refers to the
amount (quantity) of...
Faculty of Business and Economics (FBE), The IIPM, New Delhi
Price
Law of Supply
– The law of supply states that,
other th...
Faculty of Business and Economics (FBE), The IIPM, New Delhi
The Supply Schedule and the
Supply Curve
 The supply schedul...
Faculty of Business and Economics (FBE), The IIPM, New Delhi
Table 4-4: Ben’s Supply Schedule
53.00
42.50
32.00
21.50
11.0...
Faculty of Business and Economics (FBE), The IIPM, New Delhi
Price of
Ice-Cream
Cone
Quantity of
Ice-Cream
Cones
6 8 10 12...
Elasticity of supply
• The degree of responsiveness of the
quantity of a commodity applied for a
small change in its price...
Types of elasticity
• A)perfect elasticity or infinite elasticity of
supply (Es = ∞)
• Any quantity can be supplied it a g...
Perfectly elasticity or infinite
elasticity of supply
Faculty of Business and Economics (FBE), The IIPM, New Delhi
Quantit...
• B) perfectly inelasticity supply ((Es =
0)
• Supply remain constant irrespective
of the changes in price.
• Other words ...
PERFECTLY ELASTICITY OF
SUPPLY
Faculty of Business and Economics (FBE), The IIPM, New Delhi
price
O
X
Y
Quantity suppliedQ
UNITY ELASTICITY ((Es = 1)
•The percentage
change in quantity
supplied is equal to
the percentage
change in price
Faculty ...
Unit elasticity
» Es = 1
Faculty of Business and Economics (FBE), The IIPM, New Delhi
price
O
X
Y
Quantity supplied
S
RELATIVELY ELASTIC ((Es ► 1)
• The elasticity of supply is
greater than 1 the supply is
said to be elastic. If the price
i...
• Es ► 1
Faculty of Business and Economics (FBE), The IIPM, New Delhi
price
O
X
Y
Quantity supplied
RELATIVELY INELASTICITY
SUPPLY (Es ◄ 1)
• The % change in
quantity supplied is
less than % change in
price. Supply is said...
RELATIVELY INELASTIC SUPPLY
• Es ◄ 1
Faculty of Business and Economics (FBE), The IIPM, New Delhi
price
O
X
Y
Quantity sup...
Dr.K.Baranidharan
THANK YOU
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EEFA - LAW OF SUPPLY - FINAL YEAR CS/IT - SRI SAIRAM INSTITUTE OF TECHNOLOGY - DR,K,BARANIDHARAN

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EEFA - LAW OF SUPPLY - FINAL YEAR CS/IT - SRI SAIRAM INSTITUTE OF TECHNOLOGY - DR,K,BARANIDHARAN

  1. 1. Dr.K.Baranidharan Present by…
  2. 2. Engineering Economics & Financial Accounting Ee&fa 218 August 2013
  3. 3. LAW OF SUPPLY
  4. 4. Law of Supply • Law of Supply- refers to the relationship between price and the quantity of a good or service that firms are willing to produce. The higher the price of the product leads to more supplies and more companies making the product. Price As price increases… Supply Quantity supplied increases Price As price falls… Supply Quantity supplied falls
  5. 5. Faculty of Business and Economics (FBE), The IIPM, New Delhi SUPPLY • Quantity Supplied refers to the amount (quantity) of a good that sellers are willing to make available for sale at alternative prices for a given period.
  6. 6. Faculty of Business and Economics (FBE), The IIPM, New Delhi Price Law of Supply – The law of supply states that, other things equal, the quantity supplied of a good rises when the price of the good rises.
  7. 7. Faculty of Business and Economics (FBE), The IIPM, New Delhi The Supply Schedule and the Supply Curve  The supply schedule is a table that shows the relationship between the price of the good and the quantity supplied.  The supply curve is a graph of the relationship between the price of a good and the quantity supplied.  “Other thing being equal”
  8. 8. Faculty of Business and Economics (FBE), The IIPM, New Delhi Table 4-4: Ben’s Supply Schedule 53.00 42.50 32.00 21.50 11.00 00.50 00.00 Quantity of cones Supplied Price of Ice- cream Cone ($)
  9. 9. Faculty of Business and Economics (FBE), The IIPM, New Delhi Price of Ice-Cream Cone Quantity of Ice-Cream Cones 6 8 10 120 2 1.50 1.00 1 2.00 3 4 $3.00 2.50 5 0.50 Figure 4-5: Ben’s Supply Curve
  10. 10. Elasticity of supply • The degree of responsiveness of the quantity of a commodity applied for a small change in its price. Faculty of Business and Economics (FBE), The IIPM, New Delhi
  11. 11. Types of elasticity • A)perfect elasticity or infinite elasticity of supply (Es = ∞) • Any quantity can be supplied it a given price and there is no need to increase the price • On the other hand the firm can even stop the supply completely. • But this situation is not found in the real world and is only a hypothetical case. • Curve: the shape of the line is horizontal and parallel to the x-axis Faculty of Business and Economics (FBE), The IIPM, New Delhi
  12. 12. Perfectly elasticity or infinite elasticity of supply Faculty of Business and Economics (FBE), The IIPM, New Delhi Quantity supplied O X Y p
  13. 13. • B) perfectly inelasticity supply ((Es = 0) • Supply remain constant irrespective of the changes in price. • Other words the firm is completely insensitive to the price change. • Curve; the shape of the supply curve is a vertical line parallel to the y - axis Faculty of Business and Economics (FBE), The IIPM, New Delhi
  14. 14. PERFECTLY ELASTICITY OF SUPPLY Faculty of Business and Economics (FBE), The IIPM, New Delhi price O X Y Quantity suppliedQ
  15. 15. UNITY ELASTICITY ((Es = 1) •The percentage change in quantity supplied is equal to the percentage change in price Faculty of Business and Economics (FBE), The IIPM, New Delhi
  16. 16. Unit elasticity » Es = 1 Faculty of Business and Economics (FBE), The IIPM, New Delhi price O X Y Quantity supplied S
  17. 17. RELATIVELY ELASTIC ((Es ► 1) • The elasticity of supply is greater than 1 the supply is said to be elastic. If the price increase by 10% the supply increase by more than 10% • Conversely, if the price falls by 10% the supply falls by more than 10% Faculty of Business and Economics (FBE), The IIPM, New Delhi
  18. 18. • Es ► 1 Faculty of Business and Economics (FBE), The IIPM, New Delhi price O X Y Quantity supplied
  19. 19. RELATIVELY INELASTICITY SUPPLY (Es ◄ 1) • The % change in quantity supplied is less than % change in price. Supply is said to be inelasticity. Faculty of Business and Economics (FBE), The IIPM, New Delhi
  20. 20. RELATIVELY INELASTIC SUPPLY • Es ◄ 1 Faculty of Business and Economics (FBE), The IIPM, New Delhi price O X Y Quantity supplied
  21. 21. Dr.K.Baranidharan THANK YOU
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