The quantity of goods and services that the suppliers are willing and able to sell in the market, at various prices per period of time is called supply. In other words supply is the fusion of supplying elements such as willingness to sell or able to sell commodities in the market.
✳Law of supply
Other things remaining the same, the increase in price causes increase in demand & decrease in price causes decrease in demand. There is positive and direct relationship between price & quantity supply of commodity.
Movement & Shift in supply.
The change in quantity supply of commodity due to the change in the price, where other non-price factors remaining the same is movement in supply. It explains how suppliers moves in different points in different in same supply curve with the change in price, ceteris peribus. The movement takes place in same supply curve leftward or rightward. The leftward shift in supply is contraction in supply and rightward shift in supply is expansion in supply. Here the quantity supply is determined only by the price. The following figure shows the movement in supply curve.
The change in position of supply curve from it’s origin due to the change in non-price factors remaining the same is shift in supply. It explains how the produces moves in different supply curve leftward or rightward with the change in non-price factors. The shift takes place in different supply curve at constant price. The leftward shift in supply is called decrease in supply and the rightward in supply is called increase in supply. The quantity supply is determined by various non-price factors remaining the price as given/constant.
✳Factors causing shift in supply curve
The determinant of shift in supply which causes the change in supply curve are factors causing shift in supply curve. Only the non-price factors[cost of production, numbers of firms in industry, tax & subsidy, change in technology, size of population etc.] causes shift in supply curve. The following points can be described as determinants of shift in supply curve.
i)Cos of production: If the cost of production increases it reduces production and thereby reduces the supply,which causes leftward shift in supply curve, and vice versa.
ii)Number of firms in industry: Higher the number of firms in industry higher will be production and supply rises which causes rightward shift in supply and lower firms in industry leads to fall in production and supply decreases causing leftward shift.
iii)Tax & subsidy: If the government imposes higher rate of tax it reduces supply causing leftward shift in supply curve, but lower rate of tax & subsidy provides incentives to increase production which causes increase in supply causing rightward shift.
iv)Change in technology: The modern technology helps in increase in production which rises the supply causing rightward shift in supply curve, whereas old technology reduces supply and cause supply curve shift towards left.
v)Size of population: High population encourage for more supply causing rightward shift in supply curve and vice versa.