Published by Patrick Mutisya · 14 days ago
Students will be able to state the definition of supply and understand the basic concepts that underlie it.
Supply is the quantity of a good or service that producers are willing and able to sell at different prices during a given period of time, ceteris paribus (all other factors remaining constant).
In mathematical terms, the supply function can be expressed as:
\$Q_s = f(P, \text{determinants})\$
where Qₛ is the quantity supplied, P is the market price, and the determinants include factors such as input prices, technology, and expectations.
| Determinant | Effect on Supply (ceteris paribus) |
|---|---|
| Input prices | Higher input costs → supply decreases; lower input costs → supply increases |
| Technology | Improved technology → supply increases; outdated technology → supply decreases |
| Number of sellers | More sellers → supply increases; fewer sellers → supply decreases |
| Expectations of future price | Expect higher future price → current supply may decrease (producers hold back); expect lower future price → current supply may increase |
| Taxes and subsidies | Higher taxes → supply decreases; subsidies → supply increases |
| Government regulations | Stringent regulations (e.g., quotas) → supply decreases; deregulation → supply increases |
The supply curve graphically represents the relationship between price and quantity supplied. It typically slopes upward from left to right, reflecting the direct relationship between price and quantity supplied.