Supply refers to the output
of production units,firms,and factories.It is the supplier who makes the
decision…..how much to supply at the existing market price.
The Law of Supply states that as the price of the good increases, a greater quantity will be supplied,and when there is a price reduction less, will be supplied on to the market.
a---- price of a good in
b---- price of related goods.
c---- the cost of producing the good in question.
d---- the state of technology.
e---- the level of government taxation..ie. indirect tax.
f---- the number of sellers in the market place …eg --think of the no. of mobile phone shops which have opened in the last year.
g---- the objectives of the firm in question….ie. is it market share or alternatively the firm may want to remain small and cut costs?
What causes a movement along
the supply curve ?
Just as was the case with the demand curve it is a change in the price of the good itself which causes a movement along the supply curve.
It is important to remember that a shift to the left really means less is being supplied at each price, and a shift to the right means more is supplied.
The supply curve shifts to the right when:
a---there is a reduction
in costs of production.
b--- an improvement in technology.
c--- in the case of an increase in the number of sellers.
------more of the product will be supplied on to the market.
a---there is an increase
in production costs.
b--- the no.of sellers in the market -place decreases.
c--- when there is an increase in direct taxation.
----less will be supplied at the prevailing price.