2-Supply: The quantity of products that supplied to the markets for selling with a certain price

during certain period of time.

(2-3) Factors affecting supply:

1- Price: Refers to the main factor that influences the supply of a product to a greater extent.
Unlike demand, there is a direct relationship between the price of a product and its supply. If the
price of a product increases, then the supply of the product also increases and vice versa. Change
in supply with respect to the change in price is termed as the variation in supply of a product.

Speculation about future price can also affect the supply of a product. If the price of a product is
about to rise in future, the supply of the product would decrease in the present market because of
the profit expected by a seller in future. However, the fall in the price of a product in future would
increase the supply of product in the present market.

2- Factor Prices and their Availability: Act as one of the major determinant of supply. The
inputs, such as raw material man, equipment, and machines, required at the time of production are
termed as factors. If the factors are available in sufficient quantity and at lower price, then there
would be increase in production.

This would increase the supply of a product in the market. For example, availability of cheap labor
and raw material nearby the manufacturing plant of an organization would help in reducing the
labor and transportation costs. Consequently, the production and supply of the product would
increase.

3- Natural Conditions: Implies that climatic conditions directly affect the supply of certain
products.

4- Technology: Refers to one of the important determinants of supply. A better and advanced
technology increases the production of a product, which results in the increase in the supply of the
product

5- Transport Conditions: Refer to the fact that better transport facilities increase the supply of
products. Transport is always a constraint to the supply of products, as the products are not
available on time due to poor transport facilities.

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6- Government’s Policies: Implies that the different policies of government, such as fiscal policy
and industrial policy, has a greater impact on the supply of a product. For example, increase in tax
on excise duties would decrease the supply of a product. On the other hand, if the tax rate is low,
then the supply of a product would increase.

7- Prices of Related Goods: Refer to fact that the prices of substitutes and complementary goods
also affect the supply of a product. For example, if the price of wheat increases, then farmers would
tend to grow more wheat than nee. This would decrease the supply of rice in the market.

Chapter 3

(3-1) Time Value of Money: Time Value of Money The value of money is dependent on
the time at which it is received. A sum of money on hand today is worth more than the same sum
of money to be received in the future because the money on hand today can be invested to earn
interest to gain more than the same money in the future. Thus, studying the present value of money
(or the discounted value) that will be received in the future is very important. The money
consequences of any alternative occur over a long period of time, a year or more.

To facilitate the computations of interest formulas, the following notations will be used:

i = interest rate per interest period (usually calculated annually), it is stated as a decimal (e.g., 9%
interest is 0.09).

n = number of interest periods.

P = A present sum of money.

F = A future sum of money.

A = A series of periodic, equal amount of money.

I =Total interest.

G = uniform gradient amount that repeats at the end of each year, starting at the end of the
second year and stopping at the end of year n.

This is always paid or received at end of period.

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(3-2) Cash Flow Diagrams:

Cash flow diagram is a financial tool used to present cash flows related to safety, project, or
business.

According to the schedule, cash flow diagrams are widely used in structuring and analysis of
securities, in particular swaps. They can also be used to represent payment schedules for bonds,
mortgages and other types of loans.

In the context of business, Sciences and engineering, they are used by accountants and engineers
to represent the monetary transactions that will take place during this project. Transactions can
include initial investments, maintenance costs, projected earnings or savings resulting from the
project, as well as rescue and salvage value of the equipment at the end of the project. These
diagrams and the relevant simulation are used to determine breakeven "cash flow neutrality", or in
the future, and in General to analyze operations and profitability. View the Cashflow forecast and
cash flow from operating activities.

Cash flow diagrams :visually represent income and expenses over some time interval. The
diagram consists of a horizontal line with markers at a series of time intervals. At appropriate
times, expenses and costs are shown.

1 2 3 4 5 6 7 8
_ +
9

p A A A A A
F
(3-2) Cost :. the amount of money that is needed to pay for buy something or get services such as
(Raw materials, Labour costs, Shipping fees, Tax)

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(3-2-1) Concept of Costs in terms of Traceability:

1. Direct costs

Direct costs are related to a specific process or product. They are also called traceable costs as we
can directly trace them to a particular activity, product or process.

They can vary with changes in the activity or product. Examples of direct costs include
manufacturing costs relating to production, customer acquisition costs pertaining to sales, etc.

2. Indirect costs

Indirect costs, or untraceable costs, are those which do not directly relate to a specific activity or
component of the business. For example, an increase in charges of electricity or taxes payable on
income. Although we cannot trace indirect costs, they are important because they affect overall
profitability.

(3-2-3) Concept of Costs in terms of Variability:

1. Fixed costs

Fixed costs are those which do not change with the volume of output. The business incurs them
regardless of their level of production. Examples of these include payment of rent, taxes, interest
on a loan, etc.

2. Variable costs

These costs will vary depending upon the output that the business generates. Less production will
cost fewer expenses, and vice versa, the business will pay more when its production is greater.
Expenses on the purchase of raw material and payment of wages are examples of variable costs.