1. Supply
Unit 1, Chapter 2

2. Supply
 Supply refers to the quantity of a good that
producers are willing to sell at a given price,
holding constant any other factors that
might affect the quantity supplied (ceterus
paribus assumption).
 Can we talk of supply of a commodity at any
given point of time?

3. Supply Curve
 Why is the Supply curve upward sloping?
 What happens to Marginal Cost as we
increase production?
 How are costs and production decisions
related?

4. Key features of a Supply curve
 Shows a positive relationship between price
and quantity supplied
 Is always upward sloping because as we go
on increasing production the marginal cost
also increases.

5. Marginal Cost
Suppose you are opening up a Pizza hub with
delivery service for free. You are based in
downtown New Road. Would it make sense
for you to cover Kathmandu city as a whole
for your service? What would this do to your
Marginal cost although it may mean larger
market and thus, larger production?

6. Supply and its change
 If the price of noodles increases, what
happens to its supply?
 The above is simply a Price effect along the
supply curve.

7. Price effect Vs. Change in Supply
 Change in the supply curve takes place due
to:
Changes in the marginal cost of production
Changes in the number of sellers or producers
Changes in the expectations

8. Price elasticity of Supply
 Determining factors:
How easy is it to change production in response
to price?
How fast can this be done?
 The quicker and easier it is for businesses to
do this, the more elastic the product supply
will be

9. Until we meet again
Over the last decade, computer prices have been
going down. Yet the supply of computers is ever
increasing. Is this an exception to the Law of
Supply? How can you explain this phenomenon?
- One Paragraph with approximately 100 to 120
words.
- Due Date: Tuesday, 28th
August 2007

10. Until we meet again
Over the last decade, computer prices have been
going down. Yet the supply of computers is ever
increasing. Is this an exception to the Law of
Supply? How can you explain this phenomenon?
- One Paragraph with approximately 100 to 120
words.
- Due Date: Tuesday, 28th
August 2007