Unit-IV; Professional Sales Representative (PSR).pptx
Supply
1. supply
Supply
refers to the quantities of a product
that suppliers are willing and able to sell at
various prices per period of time , other
things being equal.
2. The law supply
“The law of supply states that, other
things remaining the same, the
quantity of any commodity that firms
will produce and offer for sale rises
with rise in price and falls with falls
with fall in price.”
4. DETERMINANTS OF SUPPLY
Price of the commodity:- The most important
determinant of supply of commodity is its own price.
Given other things, larger quantity will be supplied
at a higher price and smaller at a lower price.
Goals of the firm:- Primary objective of the firm is
to make profit. Higher is the profit from the sale of a
commodity, higher will be the amount supplied and
vice versa.
Input prices:- If producers have to pay high price
for factors of production, cost of production will be
high. Given the price, higher cost of production
reduces profit and lead to lower amount being
offord.
5. DETERMINANTS OF SUPPLY
Price of other goods:- If price of other commodities
are rising, producers will find it more profitable to
supply other goods and as a result the supply of
commodity in question will fall.
Technique of production:- Introduction of any new
machine, method of production etc will reduce the
cost of production and therefore increase profit
leading to more supply.
Govt. policy:- Imposition of heavy indirect tax will
lead to rise in the cost of production and thereby fall
in supply. If there is reduction in taxes or provision
of subsidy, the overall supply will rise.
6. DETERMINANTS OF SUPPLY
Expectation of producers:- If the producers expect
an increase in price in future, then they will supply
less today and offer it at higher price in future and
vice versa.
Availability of transport and communication:- An
improvement in the transport and communication
facilities will expand the size of market and motivate
producers to produce and supply more.
7. CAUSES OF SHIFTS IN THE SUPPLY CURVE
The
supply curve is upward sloping.
There are TWO types of change in
supply;
1. Movement ALONG the supply curve
2. SHIFTS in the supply curve
8. CAUSES OF SHIFTS IN THE SUPPLY CURVE
A
movement ALONG the supply curve
A movement along the supply curve is
caused by a change in PRICE of the good
or service. For instance, an increase in the
price of the good results in an EXTENSION
of supply (quantity supplied will increase),
whilst a decrease in price causes a
CONTRACTION of supply (quantity
supplied will decrease).
9. CHANGE IN QUANTITY SUPPLIED
S
C
$3.00
A rise in the price
results in a
movement along
the supply curve.
A
1.00
Quantity
0
1
5
10. CAUSES OF SHIFTS IN THE SUPPLY CURVE
A
SHIFT in the supply curve
A shift in the supply curve is caused by a change in
any non-price determinant of supply. The curve can
shift to the right or left.
A rightward shift represents an increase in the
quantity supplied (at all prices) S1 to S2, whilst a
leftward shift represents a decrease in the quantity
supplied (at all prices). S1 to S3.
12. CAUSES OF SHIFTS IN THE SUPPLY CURVE
The movements can be caused by the following;
1. Change in costs of production - if the costs of
production increase then the potential profit will fall. This
will cause producers to look at alternative goods to
produce. Therefore, an increase in the costs of
production will cause a leftward shift in the supply curve.
2. Role of technology - if the degree of technology
employed in production increases then firms will be able
to make more goods with their given level of inputs
(factors of production). Therefore, an improvement in
technology causes the supply curve to shift to the right
13. CAUSES OF SHIFTS IN THE SUPPLY CURVE
Changes in Population
An increase in population increases the supply of labor;
a reduction lowers it. Labor organizations have generally
opposed increases in immigration because their leaders
fear that the increased number of workers will shift the
supply curve for labor to the right and put downward
pressure on wages.
Changes in Expectations
One change in expectations that could have an effect on
labor supply is life expectancy. Another is confidence in
the availability of Social Security. Suppose, for example,
that people expect to live longer yet become less
optimistic about their likely benefits from Social Security.
That could induce an increase in labor supply.
