changes in supply v

7/28/2019 Changes in Supply V

1/4

CHANGES IN SUPPLY V/S CHANGES IN QUANTITY SUPPLIED.

A change in supply is represented by a shift in the supply curve. This means an entire change in

the relationship between the price and quantity supplied of a commodity. An increase in supply

is shown by a shift to the right, while a decrease in supply is shown by a shift to the right.

An example of this case would be when the price of oranges being sold in the market increases

from say Ksh 10.00 per orange to Ksh 20.00 per orange. More individuals will be encouraged to

S

S

S

S

S

S

PRICE

QUANTITY


2/4

bring their oranges to the market for sale. Thus the total supply of oranges in the market will be

influenced. The opposite is also the same.

A change in quantity supplied, on the other hand is a reaction of the amount offered for sale,as a result of changes in the commoditys own price, all other factors held constant (ceteris

paribus). An example would be one supplier selling apples in the market. Should the price of the

apples fall, then most likely, people will demand more apples and as such, he/she will supply

more apples in the market. The opposite is also true.

FACTORS THAT AFFECT SUPPLY.

The supply of a commodity is affected by factors including:

1. The Price of the commodity: It is common knowledge that when the price of oranges,

for instance, is high, orange producers will be induced to supply more than when theprice is low.

2. Price of alternative commodities: An increase in the prices of other commodities which

can be produced with the available resources, raises their profitability, relative to thecommodity in question. This will make the producers of the commodity in question shift

(some) resources from the production of the commodity towards these others. As such,

the supply curve will shift to the left, implying that less of the commodity is now

available for sale, compared with the situation before. A decrease in the prices of thealternative commodity will raise the particular commoditys profitability and cause a

rightward shift of the supply curve.

For example: A fall in the price of beans, all other factors held constant, will lead to anincrease maize production in the areas where only these two crops are grown, as farmers

shift resources from the beans to maize production.3. Prices of inputs: If inputs for the production of a given commodity are cheaper, the costs

of production will fall. This will make it possible for a company to produce more and still

make a good profit. The decline in inputs prices shifts the supply curve to the right,

meaning that more will now be supplied at the same price. An increase in the input priceswill have an opposite effect.


3/4


4/4

Causes of Abnormal Supply Curves

Causes of abnormal supply curves are not common. There is however a good example of the

abnormal supply curve. This is the bending of the supply curve of labour. This curve showsthat beyond a specific wage level, any additional rises in wages will result in decreased

working hours. (Parliamentarians exhibit this well).

changes in supply v

Documents