Supply: Law, Types, Factors, Supply curve and Change in Quantity supply

ii.         Theory of supply

iii.        Definition of supply

iv.        Explain the law of supply with tables and graphs

v.         Types of Supply

vi.        Factor determine supply

vii.       Change in quantity supply

viii.      Shift in Supply Curve

DEFINITION OF SUPPLY

Supply may be defined as the quantity of goods and services which sellers are willing and able to offer for sale at a particular price, and at a particular period of time.

Supply does not mean the entire stock of a commodity in existence or the total quantity of that commodity produced but rather it means only the amount that is put into the market or offered for sale at a given price.

EXPLANATION OF LAW OF SUPPLY WITH GRAPH AND TABLE

1.         Law of supply

2.         Supply schedule

3.         Supply curve

LAW OF SUPPLY

The law of supply states that, all things being equal, the higher the price, the higher the quantity

of a commodity that will be supplied or the lower the price, the lower the quantity of the

commodity that will be supplied.

SUPPLY SCHEDULE

Supply schedule is the table showing the relationship between the quantity supplied and price of

a commodity.  Supply schedule is divided into two:

1.         Individual Supply Schedule

2.         Market Supply Schedule

The table below shows the supply schedule for bags of wheat.

MARKET SUPPLY SCHEDULE

SUPPLY CURVE

Supply curve is a graph showing the relationship between price and quantity of that commodity

supplied. 

The diagram below shows the supply curve of the individual supply schedule.

SUPPLY SCHEDULE

Supply schedule is defined as a table that shows various quantities of goods which producers or sellers are willing and able to place for sale in the market at different prices. For example Mrs. Bello’s Supply schedule for yams.

Price per tuber (N)                  Quantity of Supplied  (tubers)

 9                             15

15                                                            20

18                                                            22

20                                                            25

22                                                            27

25                                                            35 From the table above, it is clear that the supplier (Mrs. Bello) supplied more at a higher price. This implies that the higher the price, the higher the quantity supplied.

FACTORS INFLUENCING THE SUPPLY OF A COMMODITY

1. Price of the commodity: This is the most important factor influencing supply. The higher the price of the commodity, the higher the quantity supplied and vice versa.

2. Cost of production: If the cost of producing a commodity falls, then ore of that commodity could be supplied at the existing price. It therefore means that a producer will be able to produce more commodities with the existing raw materials, hence increase in supply.
3. Technological development: An improvement in the level of technology will equate to improvement in the methods or techniques of production. This will encourage large scale production at lower costs which in turn increases supply e.g. the use of modern farming techniques and equipment.
4. Season:- The prevailing seasons will influence the supply of a particular commodity. E.g. More umbrellas will be supplied during the rainy season and this also applies to agricultural products.
5. Government Policies: Government policies such as subsidies, restriction on importation affect the supply of goods both in the long and short run.
6. Expectation of future change in prices: The expectation of suppliers about the future of the prices of some goods may affect supply. E.g. If the supplier suspects reduction in prices in future, he or she will reduce the quantity supplied of the commodity, so as to enjoy higher prices.
7. Taxation: Increased taxation on goods will raise the producer’s cost of production and by extension affect the supply of the product.

The prices of other commodities: When the prices of some commodities are high, some producers may switch over to the production of such commodities and stop producing the commodities with lower prices.

TYPES OF SUPPLY

1.         Joint Supply: Some commodities are often produced together.  Such commodities come from the same source and are said to be in joint supply.  Examples are petrol and kerosene, which are refined from petroleum: beef and hides from oxen.

When two commodities are in joint supply one may be a by-product of the other which means that you cannot increase the supply of one without increasing at the same time, the supply of the other.

2.         Composite supply: A group of commodities may provide a composite supply to satisfy demand.  For example, tea, coffee, cocoa, milk, sugar etc.  provide a composite supply of beverages.  This is the total supply for beverages.

3.         Competitive supply: This is the supply for goods that are competitively supplied.  To expand the production of one commodity generally requires a reduction in the output of another.  That is, the supply of commodity A.  Affects the supply of commodity B. For instance, factors of production can be used for various purposes.  If a piece of land is used for growing maize, it cannot be used for building a hospital at the same time.

EVALUATION QUESTIONS

1. What is a supply schedule?
2. Itemize and explain the factors influencing the supply of candle.
3. Differentiate between change in quantity supplied and change in supply.

READING ASSIGNMENT

Comprehensive Economics by Anyaele Page 130-132

Fundamentals of Economics by Anyawuocha Page 222-226.

WEEKEND ASSIGNMENT

1. Given the supply function Qs = 2p +1, the quantity supplied Q at the price of N 4 is _______ units (a) 7 (b) 8 (c) 9 (d) 10
2. The major reason for change in quantity supplied is (a) Government policy (b) Season (c) taxation (d) Price
3. The quantity of goods offered to the market at respective prices and presented in a table is called (a) Price Schedule (b) Supply Schedule (c) Scale preference (d) Demand schedule 
4. An inferior good is one (a) Whose price is lower than the prices of other goods (b) That is too bad for consumption (c) That is easily perishable (d) Whose demand falls when the income of its consumer increases
5. Which of the following is a luxury item (a) Petrol (b) Text book (c) Pencil (d) Gold

THEORY

Mention four factors that influence the supply of a commodity?

List four factors that are responsible for change in supply?