Business Economics

Presentation On-
“SUPPLY”
Submitted To- Submitted By-
Dr. Manmindar Singh Harshita Pathak
Prof.(DAVV Indore) MBA 1st Year(BF)
SFSP
•Supply means the amount offered for sale at a
given price. “Supply can be defined as a schedule
of the amount of a good that would be offered for
sale at all possible prices at any one instant of time,
or during any period of time.”
•Supply is the amount of some product producers

are willing and able to sell at a given price all other

factors being held constant.
•“Others Things Remaining the same, as the price
of a commodity rises its supply is extended and
as the price falls, its supply is contracted”.
•The quantity offered for sale varies directly with

price i.e., the higher the price the larger is the

supply, and vice versa.
•The relationship of price and quantity supplied
can be exhibited graphically as the supply curve.
•The supply curve slopes upward to the right.

•The slope tells the quantity supplied varies

directly – in the same direction – with the price.

•Price elasticity of supply measures the
responsiveness of quantity supplied to changes in
price, as the percentage change in quantity
supplied induced by changes in commodities own
price.
•In mathematical terms Elasticity of supply is the

ratio of proportional change in supply to the

proportional change in its price.
•Perfectly elastic
•Perfectly inelastic

•Unitary elastic

•Highly elastic

•Inelastic
When No percentage in price brings a very large
percentage change in quantity Supplied then it is
termed as Perfectly elastic Supply.
Here Elasticity= Infinity
When there is no change in quantity supplied with
change in its price.
•Here Elasticity=0
When the percentage change in quantity supplied is
equal to the price of the commodity.
•Here Elasticity =1
When the percentage in supply is more than the
percentage in price, It is termed as Highly Elastic
supply.
•Here elasticity>1
When the percentage in price is more than the
percentage change in quantity Supplied.
•Here elasticity<1
Supply is said to increase when, at the same price,
more is offered for sale, or the same quantity is
offered at a lower price. The supply is said to decrease
, when, a the same price less is offered for sale or the
same quantity is offered at a higher Price.
Innumerable factors and circumstances could affect a
sellers willingness or ability to produce and sell a
good. Some of the more common factors are:
•Goods own price: The basic supply relationship is
between the price of a good and the quantity
supplied. Although there is no "Law of Supply",
generally, the relationship is positive or direct
meaning that an increase in price will induce and
increase in the quantity supplied.
•Price of related goods: For purposes of supply
analysis related goods refer to goods from which
inputs are derived to be used in the production of the
primary good. 
•Technology. Technology is the way inputs are
combined to produce a final good. A technological
advance would cause the average cost of production
to fall which would be reflected in an outward shift
of the supply curve.
•Expectations: Sellers expectations concerning future

market condition can directly affect supply.[If the

seller believes that the demand for his product will
sharply increase in the foreseeable future the firm
owner may immediately increase production in
anticipation of future price increases. The supply
curve would shift out. Note that the outward shift of
the supply curve may create the exact condition the
seller anticipated, excess demand
•Price of inputs: Inputs include land, labor, energy and
raw materials. If the price of inputs increases the supply
curve will shift in as sellers are less willing or able to sell
goods at existing prices. For example, if the price of
electricity increased a seller may reduce his supply
because of the increased costs of production. The seller is
likely to raise the price the seller charges for each unit of
output.
• Number of suppliers - the market supply curve is the
horizontal summation of the individual supply curves.
As more firms enter the industry the market supply
curve will shift out driving down prices.
•Government policies and regulations: Government
intervention can have a significant effect on supply.
Government intervention can take many forms
including environmental and health regulations, hour
and wage laws, taxes, electrical and natural gas rates and
zoning and land use regulations.
The supply function is the mathematical expression
of the relationship between supply and those factors
that affect the willingness and ability of a supplier to
offer goods for sale. For example, Qs = f( P, Prg S ) is
a supply function where P equals price of the good
Prg equals the price of related goods and S equals the
number of producers. The vertical bar means that
the variables to the right are being held constant.
The supply equation is the explicit mathematical
expression of the functional relationship.
 For example, Qs = 325 + P - 30 Prg + 20S. 325 is y-
intercept it is the repository of all non-specified
factors that affect demand for the product. P is the
price of the own good. The coefficient is positive
following the general rule that price and quantity
supplied are directly related. Prg is the price of a
related good. Typically the relationship is
negative because the good is an input or a source
of inputs.