SUPPLY AND MARKET EQUILIBRIUM

SUPPLY
Quantity of a commodity actually sold at a particular price at a point of time

Determinants of Market Supply

1) Price

2) Cost of Production

3) Technology

4) Prices of related goods

5) Competition

6) Future Expectations

7) Weather Conditions

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Law of Supply

Linear Supply Function

( Sx = a+bPx)

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 Market Equilibrium - Equilibrium Price

Find the equilibrium price & quantity for the following markets
1) Qs = -20 + 3P ; Qd = 220-5P
2) Qs = -45 + 8P ; Qd = 125-2P
3) Qs + 32 – 7P = 0 ; Qd – 128 + 9P = 0

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Equilibrium Price

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 Changes in Equilibrium Price & Equilibrium Quantity

1) Demand remaining same, Supply increases

2) Demand remaining same, Supply decreases
3) Supply remaining same, Demand increases
4) Supply remaining same, Demand decreases
5) Demand increase, Supply decreases
6) Supply increases & demand decreases
7) Both Demand & Supply increase, but demand increases in greater proportion
8) Supply increases in greater proportion than demand
9) Supply decreases in greater proportion than demand

Application of theory to commodity market, factor market, property market,

share market, Gold market. FOREX

Recent cases – Rupee depreciation. Oil prices, trade war – May to October 2018

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