Supply & Elasticity Of Supply

    "Dear friends,Hope you are doing well!!This is my fourth post related to micro-economics ,I hope it will benefit you a lot in studying .

CHAPTER: Supply & Elasticity Of Supply

A) Supply: Supply refers to the quantity of commodity that a producer/seller is willing to sell at a given price during the given period of time.

•  Individual supply: individual supply refers to the quantity of commodity that a single seller is willing to sell at a given price during the given period of time.

•  market supply: market supply refers to the quantity of commodity that all seller is willing to sell at a given price during the given period of time.

B) supply schedule: it refers to different quantity of commodity that seller is willing to sell at a different price during the given period of time.

• Individual supply schedule: It refers to the different  quantity of commodity that a single producer is willing to sell at a different price during the given period of time.
• market supply schedule:It refers to the different quantity of commodity that all producer is willing to sell at a different price during the given period of time.

 Supply curve: It is graphical representation of relationship between price and quantity supply of producer.

Law Of Supply: Law of supply sate that other things be constant ,there is positive relationship between price and quantity supply.

price( inc )        quantity supply (inc) or vice versa

Supply Function: It is the functional relationship between supply and various factor affecting supply is known as supply function.

Factors affecting supply:

1) price of the commodity

price (inc)          QS(inc)

price (dec)         QS(dec)

2)Number of firms

firm               QS

(inc)               (inc)

(dec)              (dec)   

3)season and weather

favorable (inc)            QS(inc)

unfavorable(dec)        QS(dec)

 4)Govt policy

eg :tax

imposition of tax          QS(dec)

Govt reduce tax            QS(inc)

5)Subsides

govt grant subsides           QS(inc)       

govt reduce subsides         QS(dec)

Difference between change in quantity supply and change in supply.

Change in quantity supply:

other things held constant  when there is change in quantity supply due to change in its price is known as change in quantity supply

Tools are: 

• Extension in supply
• Contraction in supply

Change in supply:

when there is change in supply due to change in its factors other than price

tools are:

• Increase in supply 
• Decrease in supply

Important :why law of supply operate?

                                or 

why there is positive relationship between price and quantity supply

a)profit motive:

price(inc)                       profit margin(inc)                   QS(inc)

price(dec)                     profit margin(dec)                   QS(dec)

b)Entry and Exist of a firms/producer/seller:

 price(inc)                          QS(inc)                         Entry of a firm

price(dec)                          QS(dec)                         No entry of a firm 

c)Change in stock:

price(inc)                       Stock(dec)                   QS(inc)

price(dec)                       Stock(inc)                   QS(dec)

Price Elasticity Of Supply

It is the ratio of percentage change in quantity supply to percentage change in price

                         Es= %change in quantity supply

                           ➖➖➖➖➖➖➖➖➖

                                % change in price

Degree of price elasticity

•   perfectly elastic=Es∝
•   perfectly inelastic=Es 0
•   Elastic=Es>1
•   Inelastic=Es<1
•   Unitary Elastic=Es=1

Method of measuring price elasticity of supply 

• Percentage method
• Proportional method
• Geometry method/point method

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