Supply of a commodity is the quantity of that commodity or service which sellers are willing and able to offer for sale at a particular price over a given period of time. The higher the price, the greater will be the quantity of a commodity that will be supplied by a producer.
LAW OF SUPPLY
The law of supply states that, other things being equal the quantity supplied varies directly with the price of the commodity. When price rises, the quantity supplied will increase, and when price falls the quantity supplied also falls. The other things that are assumed equal refers to the factors that influence the supply of a commodity, such as the prices of other commodities, the prices of factors of production, the state of technology and the goals of producers.
Supply schedule shows the various quantities of a commodity which sellers are willing to sell at various prices, at a particular period of time.
|Price Per kg (N)||Quantity Supplied in kg|
The table shows that quantity supplied declined as price falls. As price drops from N5 to N4, quantity supplied dropped from 100 units to 80 units. When price drops to N1 quantity supplied dropped to 20 units.
A supply curve is a graphical illustration or diagrammatic representation of a supply schedule. As shown below, a supply curve has a positive slope. It moves upward from left to the right.
The line SS is the supply curve, with a positive slope
FACTORS DETERMINING SUPPLY
1. Input Prices: Inputs are factors of production (i.e. labour or capital) used in the production of a commodity. If their prices increase the cost of production will increase. As a result, output will fall and supply will be reduced. The reverse will happen in the case of a fall in price of a factor.
2. Technology: If new and improved methods of production are used, they tend to reduce per unit cost of production and increase output per unit of time. This will encourage increased supply of commodities.
3. Prices of other Commodities: A change in the price of another commodity also affects the supply of a commodity. If the price of good X rises, the producers of good Y may produce less of good Y and switch over to the production of good X in order to earn more profit.
4. Climatic Factors: Some climate favours sale of some particular products. During raining season, there will be more demand for umbrella. As a result, more of it will be supplied.