Market Supply Lecture, Essay Example

The supply refers to the quantity a seller may be willing to sell at a given price during a specific period of time provided everything else remains constant. Since price is not the only factor that affects supply, a distinction is made between price and non-price factors through the terms ‘quantity supplied’ and ‘change in supply’. ‘Quantity supplied’ is used when the supply is determined by price while ‘change in supply’ is used when the supply is influenced by non-price factors such as production costs and technology, prices of other goods and services offered by the supplier, future expectations, number of sellers in the market, and weather conditions.

The supply curve is upward sloping because of a positive relationship between the supply and price. When the price goes up, the sellers are motivated by profit opportunities to offer more and vice verse. A change in price causes a shift along the curve while a change in non-price factors cause a shift of the entire curve to right or left, depending upon the overall influence of the non-price factors. A rise in price will result in an upward movement along the curve and vice verse. Similarly, if the impact of a non-price factor on supply is positive, the curve will move to the right and vice verse.

While quantity supplied and price haspositive relationship, the same cannot be said for the relationship between supply and non-price factors which may or may not have a positive relationship. Production costs have a negative relationship with supply while improvements in technology may increase supply due to higher productivity.We have noticed that the prices of technological products usually decrease over time as firms figure out ways to produce them more cheaply. This trend has been observed in the case of computers and smart phones despite the fact that the products have become more technologically advanced. As far as the prices of other goods are concerned, they have a negative relationship with the supply of a particular product. Mutton and beef are substitute products and if the price of mutton goes up, farmers will shift resources from raising cows to raising goats due to higher profit potential.

Future expectations also affect supply of a product. If the demand for hybrid cars is expected to grow significantly in the near future, automobile manufacturers will allocate more resources to hybrid technology and increase supply of hybrid cars in the market. The number of sellers also has a positive relationship with product supply which is why we see a lot more supply of entry level cars than super cars because the sellers of entry level cars exceed the sellers of super cars in the automobile sector. The weather also affects the supply of a product, particularly agricultural products that require certain weather conditions for optimal productivity. Favorable weather conditions increase supply and vice versa. Not surprisingly, droughts decrease the supply of agricultural products that require significant quantity of water.