Supply
DEFINITION:-
Supply is the willingness and ability to sell a good or service. It is not the same thing as the existing stock’ or amount available’. For example, the supply of housing in a town consists of the number 9f houses, bungalows and flats, etc. which are up for sale and not the total number of houses, bungalows and flats, etc. in the town. In the spring the supply of housing tends to increase as more properties come onto the market.
THE SUPPLY CURVE:-
In most cases the more is supplied the higher the price. So supply curves slope upwards from left to right. Figure I 0. I shows a supply curve based on the supply schedule in Table 10. I.
MOVEMENTS ALONG A SUPPLY CURVE:-
Movements along the supply curve are referred to as extensions and contractions or as changes in the quantity supplied. Figure 10.2 shows an extension in supply. A rise in price from P to P causes an increase in the quantity supplied from Q to QL To supply larger quantities firms need higher prices in order to cover their higher costs.
Figure 0.3 shows a contraction in supply .A fall in price from P to P’ causes a decrease in the quantity supplied from Q to Q’.
CHANGES IN SUPPLY:-
An increase in supply means that more is supplied at each and every price. A decrease in supply means that less is supplied at each and every price. Figure 0.4 illustrates an increase in supply from 55 to 5151 This leads to an increase in the quantity supplied at any given price. For example, at the price P suppliers are now prepared to offer quantity Q’ whereas under the original supply conditions, at this price, they were only prepared to supply quantity Q. Similarly at price P1 the quantity supplied has increased from Q2 ...