04 Theory of Supply to understand the Theory.

This is the details of supply in economics and this in important to understand the economic growth.

1. Welcome to the lecture session of Supply For the Students of the 29 th -Batch Professional Master’s in Governance and Development Studies Class Conducted by Muhammad Kamruzzaman MSc in Policy Analysis and Global Governance (UK) Associate Professor Dept. of Govt. and Politics Jahangirnagar University

2. Following areas are to be deliberated under the forgoing headline Meaning and concepts of supply Law of supply Supply schedule Supply curve Exceptions of the law Change in supply Shift in supply curve

3. Meaning and concepts of supply Supply means the amount offered for sale at a given price in a given time . We may define supply as a schedule of the amount of a good that would be offered for sale at all possible prices at any one instant of time, or during any one period of time, for example, a day, a week, and so on, in which the conditions of supply remain the same. (Meyers) “ Quantity supplied is the amount of a good that firms wish to sell at a particular price.”– Professor Ragan Thomas So the conditions are : In a given price/at the particular price In a given time Amount offered for sale in the market Commodities/goods brought by the seller So, in economics- Supply means the quantity of goods that is actually brought to the market for sale by the supplier .

4. Relation with Price There is a relation between price and supply as the relation of demand. The relation is as the price of a commodity rises its supply is extend( expand) , and as the price falls its supply is contracted( slim). So if a firm supplies a good or service, the firm- Has the resources and technology to produce it Can profit from producing it and Has made a definite plan to produce and sale it

5. Supply Vs Stock Supply should be carefully distinguished from stock. Stock is the total volume of a commodity which can be brought into the market for sale at a short notice and supply means the quantity which is actually brought in the market. Matter of fact: One is can be brought in the market Another one is actually brought in the market Example: There are 5000 kg jute in market, rate is 50 tk. per kg. If the seller is agreeing to sale 3000 kg jute in the given price, then 3000 kg is supply and 5000 kg is stock. So stock is potential supply

6. Law of Supply S upply has a functional relationship with price: “Other things remaining the same, as the price of a commodity rises, its supply is extended, and as the price falls, its supply is contracted.” The quantity offered for sale varies directly with price. Example: the higher the price, the larger the supply, and vice versa. Supply has a positive relation with the price. If the price rises, the supply increases; conversely, with a fall in the price, the supply decreases.

7. Supply Schedule Price (per unit) Supply (amount) 10 15 15 25 20 30 25 40

8. Supply Curve

9. Exceptions of the law of Supply Fixed amount of the goods: no relation with the change of price Example: rare art of famous artist, Monalisa Future price to the seller: if the seller think the future may rise or increase then supply may not rise Example: stock may extend or fall In the cases of labor and wage: example: if wage is high then supply of labor is low and vice versa.

10. Causes of Change in Supply The increase and decrease in supply may take place on account of a number of factors; Cost of Production Weather Conditions in Case of Agro Sector Higher Taxation Price change of substitute . Political disturbances or war Agreement among producers

11. Causes of Change in Supply Goals of producers/close or shift in another sector Number of sellers Changes the consume attitude of the producers Joint Supply/production may increase of supply Improvement in technique Improvement in the means of communication and transport

12. Shift in Supply Curve While changes in price result in movement along the supply curve, changes in other relevant factors cause a shift in supply, that is, a shift of the supply curve to the left or right. Such a shift results in a change in quantity supplied for given price level. If the change causes an increase in quantity supplied at each price, the supply curve would shift to the right.

13. Some supply shifting factors There are several factors that may cause shift in supply curve: Price of other goods- the supply of one good may decrease if the price of another good increases, causing producer to reallocate resources to produce larger quantities of the more profitable goods. Number of sellers-more sellers result in more supply, shifting the supply curve to the right. Prices of relevant inputs- if the cost of resources used to produce a good increases, sellers will be less inclined to supply the same quantity of a good at given price, and the supply curve will shift to the left.

14. Some supply shifting factors Technology – technological advances that increase production efficiency shift the supply curve to the right. Expectations – if sellers expect prices to be increase, they may decrease the quantity currently supplied at a given price in order to be able to supply more when the price increase, resulting in a supply curve shift to the left.

15. Thank YOU