Supply function plan

SUPPLY FUNCTION

PLAN

• What is supply?
• Determinants of supply
• What is supply function?
• What is the Law of Supply?
• Supply schedule
• Supply curve
• Movement and shift in supply curve

What is Supply?

• In economics, supply refers to the quantity of a product available in the market for sale at a specified price and time.

Supply has three important aspects, which are as follows:

Supply is always referred in terms of price
Supply is referred in terms of time This means that supply is the amount that suppliers are willing to offer during a specific period of time (per day, per week, per month, bi-annually, etc.)
Supply considers the stock and market price of the product If the market price of a product is more than its cost price, the seller would increase the supply of the product in the market.

Determinants of Supply

Price of the commodity
Price of the related goods
Price of the factors of production
Goal of producers
State of technology
Miscellaneous factors

Price of the commodity

• Any producers’ primary motive is to maximize profit or increase revenue.
• That is why producers tend to supply more products in the market when the price of the product rises, with all other factors being constant. 
•  In the same way, producers tend to supply fewer products in cases when the price falls and other factors remain constant.

Price of the related goods

• Goods that could replace each other
• Tea and coffee, pepsi and coke

Substitute goods

• Goods that connected to each other
• Wheat and bread, milk and cheese, cement and bricks

Complementary goods
Substitute goods
Complementary goods
If the price of substitute goods will increase, the price of the product will decrease and vice versa.
If the price of complementary goods will increase, the price of the product will increase too and vice versa.