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The Law Of Supply

Ravinder

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What is SupplyIn the goods market, supply is the amount of a product per unit of time that producers are willing to sell at various given prices when all other factors are held constant. What is StockThe goods or merchandise kept on the premises of a shop or warehouse and available for sale or distribution.

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Element of Supply

• Quantity of commodity willing to Supply• Price of the Commodity• Time during which it is Offered for Sale

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The Law Of SupplyAffects

Quantity supplied rises as price rises, other things constant.

• Quantity supplied falls as price falls, other things constant.

Assumptions• No change in price of related

goods• No change in technology• No change in govt. policy• No change in goal of firm• No change in number of firms• No change in price of factors of

production

There is a direct relationship between price and quantity supplied.

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SUPPLY SCHEDULE

A tabular statement showing various quantities of a

commodity being supplied at various levels of price, during

a given period of time. 

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TYPES OF SUPPLY SCHEDULE Individual Demand

SchedulePRICE PIZZA HUT DOMINOS

250 1 REGULAR PIZZA

1 REGULAR PIZZA

500 2 REGULAR PIZZA

1 LARGE PIZZA

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Individual Supply Curve It is the geometrical

expression of the supply curve

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Supply ScheduleTabular presentation of law of supply is supply schedule

Prices (in Rs) Quantity supplied (in millions)

5 40

10 80

15 120

20 160

25 200

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Market supply scheduleMarket schedule is the tabular presentation of aggregate quantity supplied by the producers in the market.

Price in $ Qnty. Supply by 1 Qnty. Supply by 2 Market Supply$1 10 10 20

$3 15 15 30

1 2 Market Supply

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Market supply curveMarket supply curve is the aggregate of both the firms. It shows the quantity supplied by the producers at a particular price at a given period of time.

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Change in Supply CurveA change in supply curve occurs when a change in quantity supplied is caused only by a change in price, and vice versa.

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Shift in Supply CurveThe supply curve implies that the original supply curve has changed, meaning that the quantity supplied is effected by a factor other than price.

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What Is Equilibrium Price-quantity pair Quantity

demanded=Quantity supplied

Represented by intersection of demand and supply curves

Market Equilibrium-Price is such that quantity demanded is correctly balanced by the quantity that firm wishes to supply

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Change In Equilibrium1) Due to change in price

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2) Demand Is Perfectly Elastic

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3)Demand is perfectly inelastic

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Case Study• Nestlé has found itself in hot water in India after the local food safety

regulators said the company’s instant noodles contained unsafe levels of lead and traces of monosodium glutamate (MSG).

• The first sign of trouble emerged on 30 April this year when the local food safety regulator in Lucknow, the capital of the most populous state of Uttar Pradesh, demanded the company recall a batch of Maggi noodles.

• However, a disaster was brewing. Alarmed by the public anger, several states ordered tests and started issuing bans on the sale of Maggi noodles. It had become a full-blown crisis by the first week of June.

• The Sale of Maggi came to a stagnation and the Supply of Maggi was Zero• After his meeting with the national food safety regulators, Nestlé said it

was withdrawing Maggi noodles from stores “despite the product being safe”.

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• Nearly a year after the ban, Maggi noodles are back on shelves in India, after their noodles were announced safe

• The Supply of Maggi noodles was again started in India

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What was the affect on the Supply of Maggi?

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THANK YOU