what is supply, curve, law and schedule, Supply simply refers only to the part of the total production actually offered for sale at the ruling market price and at a particular time. This is referred to as effective supply.
DEFINITION OF SUPPLY
Supply may be defined as the quantity of any commodity that the producers are able and willing to offer for sale at alternative prices over a given period of time. In other words, the supply of a commodity is the quantity of that commodity which a producer is willing and able to sell at a given price over a period of time.
The supply of a commodity is different from the total stock of a commodity which the producer has produced. Supply simply refers only to the part of the total production actually offered for sale at the ruling market price and at a particular time. This is referred to as effective supply.
Unlike demand, supply moves in the same direction with price. The higher the price prevailing in the market, the higher the quantity of a commodity that the producer is willing to supply and vice versa.
LAW OF SUPPLY
The law of supply states that, all things being equal, the higher the price, the higher the quantity of a commodity that will be supplied or the lower the price, the lower the quantity of the commodity that will be supplied.
This law is often regarded as the second law of demand and supply. This law explains that when price of a commodity is high in the market, more quantity of it will be supplied by the producer and vice versa.
Supply schedule can be defined as a table showing the relationship between price and the quantity of that commodity supplied, in other words, supply schedule is a table which shows the different quantities of a commodity which would be supplied at various prices and at a particular time.
There are two types of supply schedules.
These are individual supply schedule and market supply schedule.
- Individual supply schedule: This is a table which shows the different quantities of a commodity which a producer offers for sale at
various prices and at a particular time. Let us consider a producer (e.g. a farmer)supplied several bags of rice at various prices as shown in Table 3.3.
A farmer’s supply schedule for bags of rice.
|Price per bag ( ||Quantity supplied (No. of bags of rice)|
|Price per bag ( ||Quantity supplied by||Total Quantity supplied|
|Mr. Oke Mrs. Bose Mr. Okeke|
|100 80 60 40 20||50 80 70 40 70 50 30 60 30 20 50 20 10 40 10||200 160 120 90 60|
In Table 3.3. the supply schedule shows the relationship between the various prices of bags of rice and the quantity which the farmer is able
to offer for sale. At a time when the price is 620, he was only willing to offer for sale about 10 bags but as the price increases to as high as 6100, he was willing to offer for sale as much as 50 bags of rice. It is seen that the farmer’s
supply is in consonance with the law of supply, which states that the higher the price, the higher of a commodity that will be supplied and vice versa.
- Market supply schedule: Market supply schedule is a schedule of all producers or suppliers of a commodity in a market. In other words, a market supply schedule is a table which shows the total quantity of a commodity which all producers of that commodity are willing and able to supply at various prices, at a particular period of time. Table 3.4 is an
example of a market supply schedule. It is a combination of all the individual producer and suppliers in a market.
In the above market supply schedule, it is assumed that there are only three producers (farmers) of rice. The table also reveals the relationship between the different prices of bags of rice and the total quantity which will be offered for sale by all the producers at each price. The table is thus is in consonance with law of supply which states that the higher the price, the higher the quantity of a commodity that will be supplied.
WHAT IS SUPPLY CURVE
Supply curve is a graph showing the relationship between price and quantity of that commodity supplied. In other words, a supply curve can be defined as a graphic or diagrammatic representation of a supply schedule. It should be noted that a supply curve is derived from a supply schedule as discussed iii unit 6.14 of this chapter.
Both the individual supply schedule and market supply schedule can be illustrated with diagrams or graphs to show an individual supply curve and market supply curve. As a rule and in accordance with the law of supply, supply curve normally slopes upwards from right to left which shows that at a higher price, a higher quantity of a commodity will be offered for sale and also at a lower price, a small quantity will he supplied.
FACTORS AFFECTING SUPPLY
- Price: The higher the price of any commodity, the higher the quantity that will be supplied and vice versa.
- Level of technology: Improved techniques reduce cost per unit of product and increase output or supply.
- Cost of production: If the cost of production increases, the producer tends to produce less of a commodity.
- Government policy: Government policy, e.g. subsidy given to farmers, in the form of free importation of equipment can lower production cost and increase supply.
- Weather: If the weather of a particular area is favorable at a particular period, more agricultural products will be produced and their supply to the market will increase.
- Taxation: An increase in taxation of materials used in production may discourage production, thereby leading to reduction in supply and vice versa.
- Price of other commodities: The supply of a commodity will be affected if the prices of other commodities rise. If the price of a substitute like maize increases, the quantity of rice produced will fall.
- Number of producers: If the number of producers of a commodity increases, there will be a corresponding increase in quantity supplied.
- Natural disasters: A plague of insects, flood, war, drought or fire will negatively affect the supply of a commodity.