Learning Objectives

1. What is Supply?
2. What is the law of supply?
3. How to graph the supply curve?
4. The factors affecting supply
5. Difference between the change in quantity
supplied & change in supply
6. Difference between individual supply&
market supply
7. Types of elasticity of supply
8. How to calculate the price elasticity of
supply?
4.1 Supply
 It is the quantity of a good or service that
producers are willing and able to sell at
various prices during a specific period.
 It represents the desire or need for a
product backed by production capacity.
 Ex: The quantity of electric cars that
producer is willing and able to sell at
$2000 next year.
4.2 The Law of Supply
 There is a positive relationship between the price
of a good and its quantity supplied, assuming all
other factors affecting supply remain constant.
 Ex: If the price of electric cars increases, the
quantity supplied of electric cars increases, and
vice versa.

P QS

P QS
 Quantity
4.2 The Supply Curve Price (x) supplied
(x)
Px 5 100
15 300
40 500
40 C*

30

20
*B
10 A
*
100 200 300 400 500 QSx
4.2 The Supply Curve
Px Px
Supply Curve

QDx QDx

The supply curve generally slopes upward from left to

right, due to the positive relationship between the price
of a good and its quantity supplied
4.3 Factors affecting supply
Government
Price
Policies

Number of
Technology
Producers

Costs of
Expectations
Production
4.3 Factors affecting Supply
Number of Producers

Px Px
S1 S S
S1

QSx QSx
A decrease in the number of An increase in the number
producers will cause a of producers will cause an
decrease in supply increase in supply
4.3 Factors affecting Supply
Costs of Production

Px Px
S1 S S
S1

QSx QSx
Higher costs of production Lower costs of production
cause a decrease in supply cause an increase in supply
4.3 Factors affecting Supply
Government Policies (taxes and subsidies)

Px Px
S1 S S
S1

QSx QSx
An increase in taxes cause a Reducing taxes cause an
decrease in supply increase in supply
4.3 Factors affecting Supply
Government Policies (taxes and subsidies)

Px Px
S1 S S
S1

QSx QSx
decreasing subsidies cause a Increasing subsidies cause
decrease in supply an increase in supply
4.3 Factors affecting Supply
Technology

Px Px
S1 S S
S1

QSx QSx
Old technology causes a Modern technology causes
decrease in supply an increase in supply
4.3 Factors affecting Supply
Expectations

Px Px
S1 S S
S1

If the price of a product QS

is x
expected to increase, the
supply of the product will
decrease
QSx
If the price of a product is
expected to decrease, the
supply of the product will
increase
4.4 Change in quantity supplied & Change in supply

 The change in the good’s price leads to a

movement along the supply curve causing a
change in its quantity supplied.
 The change in one of the factors affecting
supply other than the price of the good leads to
a shift in the supply curve causing a change in
supply.
 Q: Mark the following statements () or ()
1. According to the law of supply, a rise in the price
of chicken will automatically decreases its
quantity supplied.
2. Technology, number of suppliers and producers’
expectation on future price are known as the
determinants of supply.
3. There is a positive relationship between the price
of a good and its quantity supplied
4. The supply curve slopes downward from left to
right
 Q: Mark the following statements () or ()

5. If the number of producers in the market

decreases, the supply curve shifts to the left
6. Reducing the cost of production leads to shift the
supply curve to the right
7. The change in quantity supplied means
movement along the supply curve
8. Supply represents the buyers in the market.
Q: Choose the correct answer

1. All of the following are likely to cause an increase

in the supply of beef except ----------
a. an increase in the demand for chicken
b. an increase in the number of cattle ranchers
c. an increase in the demand for leather goods
d. a fall in the price of feed grain used to feed cattle
Q: Choose the correct answer

2. In the market for crude oil, development of new

deep-sea drilling technology ---------- the demand
curve for crude oil and ---------- the supply curve of
oil.
a. does not shift; shifts leftward
b. shifts leftward; shifts leftward
c. does not shift; shifts rightward
d. shifts rightward; shifts rightward
Q: Choose the correct answer

3. Assuming other variables are constant, decrease in

supply is the direct outcome of ----------
a. price rising
b. price falling
c. supply curve shifts leftward
d. supply curve shifts rightward
Q: Choose the correct answer
4. Which of the following factors is not the
determinant of supply?
a. Input prices
b. The number of buyers
c. Expectations of suppliers
d. Total producers
5. The supply curve shifts to left if ----------
a.the price of a good decreases
b.costs of production increases
c. costs of production decreases
Q: Draw graphs to illustrate each of the following

1. The difference between demand curve and

supply curve.
2. The difference between change in supply and
change in quantity supplied
3. The effect of technological advancement and
old technology on the change in supply.
Q: Draw graphs to illustrate each of the following

1. The difference between demand curve and

supply curve.

Px Px

QDx QSx
Q: Draw graphs to illustrate each of the following

2. The difference between change in supply and

change in quantity supplied

Px Px
S2 S S1 S
P2 B
P1 A

QSx Q1 Q2 QSx
Change in supply Change in quantity supplied
Q: Draw graphs to illustrate each of the following

1. The effect of technological advancement and

old technology on the change in supply.

Px Px S1
S S1
S

QSx QSx
Technological advancement Old technology