Elements Of Supply
SUPPLY
It is defined as the maximum units/
quantity of goods and services producers
can offer. The quantity supplied refer...
DETERMINANT OF SUPPLY
1. Changes in Technology. State of the art technology that uses
high-tech machines increases the qua...
4. Changes in the Price of Related Goods. Changes in the price of
goods have a significant effect in the supply of such go...
SUPPLY SCHEDULE
It is the relationship between the
quantity of a good supplied and its price.
Other factors that may affec...
SUPPLY CURVE
It shows graphically the
quantity of a good supplied each
price, with other factors that affect
quantity supp...
Supply Curve
Price Quantity
5 18
4 16
3 12
2 7
1 0
0
1
2
3
4
5
6
0 5 10 15 20
Series1
 Technology
 Input prices
 Prices of related goods
 Government policy
 Special influences
Factors effect the Supply c...
LAW OF SUPPLY
It states that as prices increases, quantity
supplied also increases; and as prices decreases,
quantity supp...
VALIDITY OF LAW OF SUPPLY
The law of demand is only true if
the assumption of ceteris paribus is
applied. This means there...
 Changes in Quantity Supplied (movement
along the supply curve). It shows the movement
from one point to another on the s...
Market Equilibrium it is a state which implies a
balance between demand and supply, a situation in which
quantity demanded...
Points
Price
(PhP ‘000)
Quantity
Demanded
Quantity
Supplied
State of Market Pressure on Price
A 1 1000 200
Shortage
(-800)...
is a condition when quantity
supplied is greater than the
quantity demanded. The price is
greater than the equilibrium. A
...
Quantity
Price
S
D
Excess Supply
or Surplus
3
11
Excess Supply or Surplus
Occurs when the price is set below the
equilibrium price. It is a condition where the
quantity demanded is greater than th...
Quantity
Price
S
D
Excess Demand
Or shortage
Excess Demand Or shortage
3
11
Quantity
S
D
Price Ceiling
price
Price Control: in
which govt. restrict to
suppliers and give
them limits to charge
In pri...
Quantity
S
D
Price Floor
In price Floor minimum
amount restriction
8
5
10 20
price Price Floor
Demand and supply
shift
Effect on price and
quantity
If demand rise The demand curve shift to
the right
P
Q
If demand Fall...
Quantity
Price
S
D
D’
Increase in Demand, Rightward shift
Shift in Equilibrium
Quantity
Price
S
D
S’
Increase in
supply, Rightward
shift
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Basicelementsofsupply

  1. 1. Elements Of Supply
  2. 2. SUPPLY It is defined as the maximum units/ quantity of goods and services producers can offer. The quantity supplied refers to the amount or quantity of goods and services producers are willing and able to supply at a given price, at a given period of time.
  3. 3. DETERMINANT OF SUPPLY 1. Changes in Technology. State of the art technology that uses high-tech machines increases the quantity of supply of goods which causes the reduction of cost of production. 2. Costs of Inputs Used. An increase in the price of an input or the cost of production decreases the quantity supplied because the profitability of certain business decreases. 3. Expectation of Future Price. When producers expect higher prices in the future commodities, the tendency is to keep their goods and release them when the price rises. Inversely, supply for such goods decreases if producers expect prices to decline in the future
  4. 4. 4. Changes in the Price of Related Goods. Changes in the price of goods have a significant effect in the supply of such goods. 5. Government Regulation and Taxes. Taxes imposed by the government increases cost of production which in turn discourages production because it reduces producer’s earnings. 6. Government subsidies. Subsidies or the financial aid/ assistance given by the government encourage more supply. 7. Number of Firms in the Market. An increase in the number of firms in the market leaders to an increase in supply of goods and services.
  5. 5. SUPPLY SCHEDULE It is the relationship between the quantity of a good supplied and its price. Other factors that may affect the quantity supplied, such as the prices of inputs and available production techniques, are held constant in drawing up the supply schedule.
  6. 6. SUPPLY CURVE It shows graphically the quantity of a good supplied each price, with other factors that affect quantity supplied held constant. The supply curve is typically upward sloping.
  7. 7. Supply Curve Price Quantity 5 18 4 16 3 12 2 7 1 0 0 1 2 3 4 5 6 0 5 10 15 20 Series1
  8. 8.  Technology  Input prices  Prices of related goods  Government policy  Special influences Factors effect the Supply curve
  9. 9. LAW OF SUPPLY It states that as prices increases, quantity supplied also increases; and as prices decreases, quantity supplied also decreases. This means that the higher the price of certain good and service, the higher the quantity supplied. This is because producers tend to supply more at a higher price because it could give them more profit.
  10. 10. VALIDITY OF LAW OF SUPPLY The law of demand is only true if the assumption of ceteris paribus is applied. This means there is no change in the non-price determinants of supply.
  11. 11.  Changes in Quantity Supplied (movement along the supply curve). It shows the movement from one point to another on the same supply curve.  Changes in Supply (shifting from one supply curve to another). This is brought by a change in all determinants. A shifting of the supply curve to the right indicates that there is an increase in supply, and shifting to the left indicates decrease in supply. CHANGES INVOLVING SUPPLY
  12. 12. Market Equilibrium it is a state which implies a balance between demand and supply, a situation in which quantity demanded and quantity supplied are equal. In other words, the quantity that the consumers will buy is equal to the amount or quantity the producers are able and willing to offer. This condition persists to stay at the same level, as long as other things remain constant or unless there is something that causes change in the demand and supply. Once these variables that determine demand and supply curve change, the equilibrium will also change. DETERMINATION OF MARKET EQUILIBRIUM (Intersection of Demand and Supply)
  13. 13. Points Price (PhP ‘000) Quantity Demanded Quantity Supplied State of Market Pressure on Price A 1 1000 200 Shortage (-800) Upward B 2 800 400 Shortage (-400) Upward C 3 600 600 Equilibrium (0) Neutral / Equal D 4 400 800 Surplus (+400) Downward E 5 200 1000 Surplus (+800) Downward
  14. 14. is a condition when quantity supplied is greater than the quantity demanded. The price is greater than the equilibrium. A surplus situation creases forces among suppliers which cause a downward pressure on price. Surplus
  15. 15. Quantity Price S D Excess Supply or Surplus 3 11 Excess Supply or Surplus
  16. 16. Occurs when the price is set below the equilibrium price. It is a condition where the quantity demanded is greater than the quantity supplied. Hence, in this condition, competitions among consumers for goods causes prices to rise. Shortage
  17. 17. Quantity Price S D Excess Demand Or shortage Excess Demand Or shortage 3 11
  18. 18. Quantity S D Price Ceiling price Price Control: in which govt. restrict to suppliers and give them limits to charge In price Ceiling maximum amount restriction Price Ceiling 3 5 10 15
  19. 19. Quantity S D Price Floor In price Floor minimum amount restriction 8 5 10 20 price Price Floor
  20. 20. Demand and supply shift Effect on price and quantity If demand rise The demand curve shift to the right P Q If demand Falls The demand curve shift to the left P Q If supply rise The supply curve shift to the right P Q If supply Falls The supply curve shift to the left P Q Demand and supply curve shifts and there effects on price and quantity
  21. 21. Quantity Price S D D’ Increase in Demand, Rightward shift
  22. 22. Shift in Equilibrium Quantity Price S D S’ Increase in supply, Rightward shift
  23. 23. Salamas po

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