Скачать или смотреть Eco401 Short Lecture 4 In Urdu Demand Supply and Equilibrium Analysis Law of supply

DEMAND, SUPPLY & EQUILIBRIUM ANALYSIS (CONTINUED)
SUPPLY
Supply is the quantity of a good that sellers wish to sell at each conceivable price.
Law of supply:
The law of supply states that the quantity supplied will go up as the price goes up and vice versa. As
output increases, cost will also increase. Higher prices means more profit so firms will produce more of
that product whose price has increased. New producers will also emerge in the market. And total supply
will also increase.
Supply schedule:
A supply schedule is a table (sometimes also referred to as a graph) which shows various combinations
of quantity supplied and price.
Price Quantity supplied
Supply curve:
A supply schedule is a table which shows various combinations of quantity supplied and price.
Graphical illustration of this table gives us the supply curve.
Supply function:
A supply function is an equational representation of supply as a function of all its determinants.
Quantity Supplied = f (Price)
QS = f ( Pg , Cg , a1 … an , j1 … jm , R , A , Pge t+1 )
Where,
Quantity Supplied = Qs, Price of the goods = Pg, Profitability of alternative goods = a1…..an,
Profitability of the goods jointly supplied = j1….jm, Nature and Other Random Shocks = R, Aims of
Producers = A, Expected Price of good = Pge at some future time = t+1
A supply equation is QS = c + d P
PROBLEMS OF IDENTIFICATION OR DETERMINANTS OF SUPPLY
Problems of identification arise when we can not determine that the change in the equilibrium quantities
is either caused by a change in demand or by changes in both demand and supply.
Determinants of supply are:
• Costs of production
• Profitability of alternative products (substitutes in supply)
• Profitability of goods in joint supply
• Nature and other random shocks
• Aims of producers
• Expectations of producers
Determinants in the context of supply of butter:
• A reduction in the cost of producing butter.
• A reduction in the profitability of producing cream or cheese.
• An increase in the profitability of skimmed milk.
• If weather conditions are favorable, grass yields and hence milk yields are likely to be high.
• If butter producers expect the price to rise in near future, they may decide to release less to the
market now.
FACTORS SHIFTING SUPPLY CURVE
Factors Changing Supply Effect
Equilibrium is a state in which there are no shortages and surpluses; in other words the quantity
demanded is equal to the quantity supplied.
Equilibrium price is the price prevailing at the point of intersection of the demand and supply curves; in
other words, it is the price at which the quantity demanded is equal to the quantity supplied.
Equilibrium quantity is the quantity that clears the market; in other words, it is it is the quantity at which
the quantity demand is equal to the quantity supplied.

ALGEBRAIC REPRESENTATION OF EQUILIBRIUM

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