CONCEPT OF SUPPLY
DEFINITION OF SUPPLY
Supply may be defined as the quantity of goods and services which sellers are willing and able to offer for sale at a particular price, and at a particular period of time. Supply does not mean the entire stock of a commodity in existence or the total quantity of that commodity produced but rather it means only the amount that is put into the market or offered for sale at a given price and at a particular period of time. This is referred to as Effective Supply
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 the price of commodity is high in the market, more quantity of that commodity will be supplied by the producer, and vice-versa.
Supply schedule is a table of value showing the relationship between the price and the quantity of that commodity supplied. It is the table showing the relationship between the quantity supplied and price of a commodity.
Supply schedule is divided into two which are:
1. Individual Supply Schedul
2. Market Supply Schedule
The table below shows the individual supply schedule for bags of wheat.
Supply curve is the graphical representation of the supply schedule. It shows the relationship between the price and quantity of that commodity
supplied by the producer. Supply curve is derived from a supply schedule. Unlike the demand curve, the supply curve slopes upward from left to right. Both the supply curve and the supply schedule illustrate the law of supply, which states the higher the price of a commodity, the higher the quantity supplied and vice versa.
FACTORS INFLUENCING THE SUPPLY OF A COMMODITY.
- Price of the commodity: This is the most important factor influencing supply. The higher the price of the commodity, the higher the quantity supplied and vice versa.
- Cost of production: If the cost of producing a commodity falls, then more of that commodity could be supplied at the existing price. It therefore means that a producer will be able to produce more commodities with the existing raw materials, hence increase in supply.
- Technological development: An improvement in the level of technology will equate to improvement in the methods or techniques of production. This will encourage large scale production at lower costs which in turn increases supply e.g. the use of modern farming techniques and equipment.
- Season:- The prevailing seasons will influence the supply of a r commodity. E.g. More umbrellas will be supplied during the rainy season and this also applies to agricultural products.
- Government Policies: Government policies such as subsidies, restriction on importation affect the supply of goods both in the long and short run.
- Expectation of future change in prices: The expectation of suppliers about the future of the prices of some goods may affect supply. E.g. If the supplier suspects reduction in prices in future, he or she will reduce the quantity supplied of the commodity, so as to enjoy higher prices.
- Taxation: Increased taxation on goods will raise the producers cost of production and by extension affect the supply of the product.
- The prices of other commodities: When the prices of some commodities are high, some producers may switch over to the production of such commodities and stop producing the commodities with lower prices