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INTRODUCTION TO INDIAN ECONOMY 1.7 CONCEPT OF SUPPLY PRESENTED BY AYUSSH SANGHI
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SUPPLY Willingness/ desire to sell. The quantity supplied of any good is the amount that sellers are willing and able to sell. o There are many determinants of quantity supplied, o There are many determinants of quantity supplied, but again, price plays a central role in our analysis. When the price of cold drink is high, selling cold drink is profitable, and hence the quantity supplied is large.
SUPPLY On the contrary, when the price of cold drink is low, the business is less profitable, and so sellers produce less cold drink. o At a low price some sellers may choose to shut down if their quantity supplied falls to zero, as the quantity supplied rises as the price rises and falls as the price falls, we say that the quantity supplied is directly proportional to the price of the good.
LAW OF SUPPLY The relationship between p supplied is called the law of supply Other price of a good rises, the quantity supplied of the good also rises, and when the price falls, the quantity supplied also falls rice and quantity things remaining equal, when the
LAW OF SUPPLY Supply Relatlonshlp Supply Qr Q quantty
INDIVIDUAL SUPPLY VERSUS MARKET SUPPLY The curve relating to price and quantity supplied is called the supply curve Market supply is the sum of the supplies of all sellers.
INDIVIDUAL SUPPLY VERSUS MARKET SUPPLY o When we sum the individual supply curves horizontally we get the market supply curves. o In order to find the total quantity supplied at any price, the individual quantities found on the horizontal axis of the es are added. o The market supply curve shows how the quantity supplied of a good varies as the price of the good varies, while all the factors that affect how much suppliers want to sell are held constant.
SHIFT IN SUPPLY CURVE The supply curve in the diagram for Good X shows how much Good X producers offer for sale at any given price, holding constant all the other factors beyond price that influence producers' decision about how much to sell. This relationship can fluctuate over time, which is This relationship can fluctuate overi represented by a shift in the supply curve. For example,
SHIFT IN SUPPLY CURVE Example: Suppose the price of rubber falls. Because rubber is an input into producing tyres, the fall in the price of rubber makes selling tyres more profitable as it is cheap. o This raises the supply of tyres. At any given price, sellers are now willing to produce a larger quantity. Thus, the supply curve for tyres shifts to the right.