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Supply Analysis


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Supply Analysis

  1. 1. Presentation On Supply Paras Agarwal Pranay Reddy Haswant Reddy Shahid Abhilash Manikanta Yadav
  2. 2. Supply & Its Features Def. Of A Supply :  Features Of Supply : Supply is the quantity of a  Supply is always expressed in commodity that the producer terms of price. is writing to sell in the market  Supply is a flow because it is at a given price in given measured over a period of period of time time
  3. 3. Supply Schedule Individual supply schedule  Market supply schedule Def. It is defined as a table  Def. It is a table which shows which shows various quantity of various quantity of commodity commodity. which an individual that all the firms are willing to producer offers for sale during a supply at each market price given period of time at, different during a given period of time prices
  4. 4. Law Of Supply & Supply Curve The fundamental principle of Law Of 12 Supply is that - Supply of any commodity is directly proportional to Price of that commodity. 10 That means, as the price of a good increases, suppliers will attempt to 8 maximize profits by increasing the quantity of the product sold. Price Of Units 6₰ Note :≡ Main assumption of law of supply is cetris paribus i.e. other things 4 remaining the same.≡ Other assumptions are 2≡ (i) price of related goods should remain same≡ (ii) goal of the firm should not change, 0 (iii) input prices & taxation policies 100 200 300 400 500 600 700 800 900 1000 should remain same. Supply Units
  5. 5. Factors Affecting The Supply Price of the commodity Price of related goods Goals of the firm Input price/ factor price/ cost of production State of technology No. of producers Future expectations regarding change in price Taxes & subsides Natural factors Means of transport & communication
  6. 6. Reasons For Supply Curve Moving Upwards Price & quantity relationship Entry of new firms Goal of earning higher profit
  7. 7. Change (Or) Shift Of The Supply Curveж Def. Change in the supply means change in total, shift of supply curve takes place due to change in the factors other than the product price. There are two types of movement. (a) Increase (b) Decrease When the supply of a commodity When the supply of the commodityincreases. due to favorable changes decreases due to some unfavorablein factors other than the price of the changes in the factors other than the product it is called increase in price of the goods the supply curve supply. In such a case there is a shifts to the left wardrightward shift of the supply curve Y S2 S Y S S1 Price Price P P S2 S S1 S Increases Decrease O Q Q1 X Qty O Q Q1 X Qty
  8. 8. Movement Along The Supply Curveж Def. Change in quantity supplied due to change of the price in same given supply curve of the commodity. There are two types of movement of it. (a) Extension (b) Contraction refers to increase in quantity refers to decrease in quantity supplied due to rise in the price of supplied due to rise in the price ofgood. It is an upward movement on good. It is an downward movement the same supply cure on the same supply cure Y SPrice P3 Extension P1 P2 S Contraction O Q2 Q1 Q3 X Qty
  9. 9. Reasons For Supply Curve Moving Downwards Obsolete technique of production Increase. in price of related goods Increase. in cost of production Decrease. In no of firms
  10. 10. Exceptions To Law Of Supply  There are two exceptions to law of supply. They are, (a) A Vertical Straight Line (b) Backward Sloping Curve Supply Curve This type of supply curve might occur in It happens in the case of highly the case of Laborers in terms of no ofperishable commodity. supply for which hours worked. In this case to somecannot he increased or decreased due to extent supply of Laborer increases with their highly perishable nature for increase in the wages but after a certain example- fish, milks and milk point supply of Labor starts decreasing products, leafy vegetables etc. even if the wages are increasing 1. Y S S YPrice Wages W5 P3 W4 P2 W3 P1 W2 P W1 S O Q X Qty O X Laboures L5 L1 L2 L3
  11. 11. Elasticity Of Supply & Factors Affecting It Def. Elasticity of supply refers to responsiveness of quantity supplied to the change in its own price. Es = % Change in quantity supplied % Change in priceFactors Affecting Elasticity Of Supply :☻ Time factor☻ Nature of the commodity☻ Production Capacity☻ Future price expectation☻ Nature of input☻ Behaviors of cost of production☻ Risk taking
  12. 12. Degree Of Price Elasticity Of Supply Price Elasticity Of Supply helps  Five Types Of P.E.S producers to have a better understanding of its present  Inelastic Or Less Than Unitary and future supply outcome Elastic Supply  More Than Unitary Elastic OR If supply is elastic, producers Elastic Supply can increase output without a  Unitary Elastic Supply rise in cost or a time delay  Perfectly Elastic If supply is inelastic, firms  Perfectly Inelastic find it hard to change production in a given time period.
  13. 13. Perfect Inelastic [ PES = 0 ] Perfectly Elastic [ PES =  ] Y YPrice S P2 Price Es = ∞ Es = 0 P P S P1 S O Q X Qty O Q Q1 Q3 X Qty Example : Antique Goods In Auction Hypothetical Example : Sale Of Oxygen In Medieval Ages
  14. 14. Unitary Elastic Supply More Than Unitary Elastic Supply [ PES = 1 ] [ PES > 1 ] Y X S Price Price P1 P Es > 1 Es = 1 P P1 S O Q1 Q2 Y Qty O Q Q1 X QtyHypothetical Example : Wishes Granted By Hypothetical Example : Gold Ornaments Genie To Aladdin In Arabian Nights In My On Special Occasions Childhood
  15. 15. Less Than Unitary Elastic Supply [ PES < 1 ] Y SPrice P1 P Es < 1 S O Q Q1 X Qty Example :
  16. 16. Time Period
  17. 17. Very Short Period Short Period Y S Y S PricePrice P3 P P1 S P2 O Q X Qty O X Qty Supply = Constant, Supply Curve Is Supply Curve In This Case Will Be Straight Line From X-Axis Upward Sloping Originating From X – Example : All Perishable Goods Axis. Example : Fruits, Vegetables, Bakery Products
  18. 18. Long Period Very Long Period (i) Y S Y Price Price ` S S S S O X Qty O X QtySupply Curve In This Case Will Be Upward Supply Curve In This Case Is Almost A Sloping, Originating From Y – Axis Horizontal Straight Line Originating From Examples : Clothes, Utensils Etc. Y – Axis. Example : Electronic Goods, Furniture Etc.
  19. 19. Difference B/W Stock & Supply Basic of diff. Stock Supply1. Meaning Refers to the total amount of goods which Means quantity of commodity that are producers & seller are ready do offer for sell at a offered for sale in the market in given particular point of time. period of time at the given price1. Dependence Stock Of the commodity mainly depends on Supply Of a commodity. depends mainly a) Production of commodity . on the market price of the commodity b) Procurement price c) Storage & transport cost1. Concept It has a stock concept i.e. stock refers to amount of It is a flow concept i.e. it refers to the a commodity. at a particular point of time amount of a commodity during a period of time.1. Commodities In case of highly perishable commodity. stock & In case of durable commodity. supply supply would almost he same since these items consists only a part of total stock cannot be stoked for a long period.1. Objective The stock of any commodity. helps in checking Enables the firm to earn sales revenues fluctuations of market price.
  20. 20. Any Q’ns ?? Thank You !!!