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Business Economics - Supply
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Description: Theory of Demand and SupplyUNIT – 3 : SUPPLYAt the end of this Unit, you should be able to: 1. Explain the meaning of supply. 2. List and provide specific examples of determinants of supply and elasticity of supply. 3. Describe the law of supply. 4. Describe the difference between movements on the supply curve and shift of the supply curve. 5. Explain the concept of elasticity of supply with examples. 6. Illustrate how the concepts of demand and supply can be used to determine price.SUMMARY• Supply means the quantity of goods (or commodities) offered for sale at a particular price at a certain point of time. Supply always relates to price. • The determinants of supply other than its own price are: prices of the related goods, prices of factors of production, state of technology, government policy and other factors. • The law of supply states that when the price of the good rises, the corresponding quantity supplied increases and when the price reduces, the quantity supplied also reduces. There is a direct relationship between price and quantity supplied. • The supply curve establishes the relationship between the amount of supply and the price. It is an upward sloping curve showing a positive relationship between price and quantity supplied. • When the supply of a good increases as a result of an increase in its price we say that there is an increase in the quantity supplied and there is an upward movement on the supply curve. The reverse is the case when there is a fall in the price of the good. • Elasticity of supply means the responsiveness of supply to change in the price of the commodity. • The elasticity of supply can be classified in to perfectly inelastic supply, relatively less-elastic supply, relatively greater-elastic supply, unit-elastic and perfectly elastic supply. • The measurement of supply-elasticity is of two types- point ela
Category: Finance & Accounting > Economics > Supply Chain
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