5.0     INTRODUCTION

Supply refers to the quantity of a good or service that producers are willing and able to sell at different prices over a specific period of time.

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          5.1     DETERMINANTS OF SUPPLY

• Price of the Good: Higher prices typically lead to an increase in supply.
• Cost of Production: If production costs decrease, supply increases.
• Technology: Advances in technology can enhance production efficiency, increasing supply.
• Number of Sellers: More sellers in the market generally increase the overall supply.
• Expectations: If producers expect prices to rise in the future, they may withhold supply now to sell later at higher prices.
• Government Policies: Taxes, subsidies, and regulations can affect supply.

          5.2     SUPPLY SCHEDULES AND SUPPLY CURVES

SUPPLY SCHEDULE: A table that shows the relationship between the price of a good and the quantity supplied.

SUPPLY CURVE: A graphical representation of the supply schedule, typically upward sloping, indicating that as price increases, the quantity supplied also increases.

          5.3     DISTINCTION BETWEEN CHANGE IN QUANTITY SUPPLIED AND CHANGE IN SUPPLY

• Change in Quantity Supplied: Refers to a movement along the supply curve due to a change in the price of the good.
• Change in Supply: Refers to a shift of the entire supply curve, caused by factors other than the price of the good (e.g., changes in production costs, technology, etc.).

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          5.4     TYPES OF SUPPLY

• Joint/Complementary Supply: When the supply of one good is linked to the supply of another (e.g., beef and leather).
• Competitive Supply: When two goods are produced using the same resources, and an increase in the supply of one lead to a decrease in the supply of the other (e.g., butter and margarine).
• Composite Supply: When a good is supplied from different sources or methods (e.g., electricity from various power plants)

5.5     ELASTICITY OF SUPPLY

The elasticity of supply, also known as price elasticity of supply, quantifies the responsiveness of the quantity supplied to changes in the good’s or service’s price. 

DETERMINANTS OF ELASTICITY OF SUPPLY

• Time Period: Supply is generally more elastic in the long run than in the short run.
• Availability of Factors of Production: If resources are readily available, supply is more elastic.
• Mobility of Factors: If factors of production can be easily moved, supply is more elastic.
• Nature of the Product: Perishable goods tend to have more inelastic supply.

5.6     MEASUREMENTS OF ELASTICITY OF SUPPLY

Elasticity of supply is measured using the formula:

Es = % (Change in Quantity Supplied) / (% Change in Price)

• Elastic Supply (E_S > 1): Quantity supplied changes significantly with price changes.
• Inelastic Supply (E_S < 1): Quantity supplied changes little with price changes.
• Unitary Elastic Supply (E_S = 1): Quantity supplied changes proportionately with price changes.

5.7     APPLICATIONS OF ELASTICITY OF SUPPLY

• Helps businesses make production decisions.
• Assists policymakers in understanding market responses to price changes.
• Useful in predicting the impact of taxes and subsidies on supply.