Supply is the quantity of a good or service that producers are willing to sell at a given price. certain period. The relationship between price and supply is no longer inverse, but direct. The law of supply states that supply, ceteris paribus, changes in direct proportion to changes in price. In other words, as prices rise, producers offer more goods for sale, and as prices fall, they offer fewer.

Supply, like demand, is depicted by a graph, but turned in the other direction (has a slope from right to left).

Offer table:

Offer schedule: R– price; Q- the amount of the offer

The response of supply to price is explained by the fact that, firstly, firms in the industry, when prices increase, use reserve (if any) or quickly introduced new capacities, which will lead to an increase in supply. Secondly, in the event of a prolonged and sustained price increase, other producers will rush into this industry, which will further increase production and supply. However, in the short term, an increase in supply does not always come immediately after an increase in price, since there may not be reserves for increasing production (the existing equipment operates at a maximum load of three shifts), but the expansion of capacities (including hiring additional labor, etc.) and the transfer of capital from other industries usually cannot be carried out in a short time. But in the long run, an increase in supply always follows an increase in price.

Offer price and its limits

The offer price is the price at which a product is offered for sale in a competitive market, or it is the minimum price at which producers are willing to sell their products or services. This price is based on the cost of producing the product.

The market price cannot fall below the offer price, because then production and sales become unprofitable.

The principle of "cost of production" and the principle of "ultimate utility" are undoubtedly constituent parts one universal law of supply and demand, each of them can be compared to one of the blades of scissors. This pricing model can be called a two-factor pricing model.

Give your own explanation for the positive slope of the supply curve.

A positively sloping short-term aggregate supply curve is constructed on the basis of the assumption that the expected level of input prices is adjusted to changes in aggregate demand and in the prices of final products. The vertical coordinate of the point of intersection of the aggregate supply curves in the short-term and long-term time intervals indicates the expected level of prices for the factors of production involved, which is the basis for constructing the aggregate supply curve in the short-term time interval. Each increase in the expected level of prices for attracted factors of production shifts the aggregate supply curve upwards in short-term time intervals; a decrease in the expected level of prices for factors of production corresponds to a shift in this curve.

Formula" of manufacturer's interest

The essence of any business is clearly represented in its formula

where D - initially advanced (issued on account of upcoming payments) funds;

T - purchased goods;

D" - an increased amount of money,

D" \u003d D + Δd,

where Δd is the increase in money (profit).

From this it is clear how the entrepreneur operates. From the very beginning, he must have funds put into circulation for the purpose of profit. On them he buys certain goods. Ultimately, the businessman sells the commodity values ​​he has on the market and receives an increased amount of money. The increase in money compared to the amount originally spent is his income (profit).

LECTURE

SENTENCE. VALUE OF THE OFFER. OFFER FUNCTION

Sentence(from English.supply, S) - the relationship between the price and the amount of an economic good that the producer is willing and ready to offer for sale over a certain period of time.

AT this definition neither quality nor quantification mentioned dependency. Only the need for producers to have a desire to sell some good on the market and readiness to do so is emphasized. You can specify the quantitative side of the dependence under consideration if you ask manufacturers one of the following questions:

Ø “What is the maximum amount of the good you are willing to sell at a given price?”

Ø “At what minimum price are you willing to sell a given quantity of a good?”

As answers to these questions, we will get what in economic theory is called the amount of the offer and the offer price, respectively.

Offer amount is the maximum amount of an economic good that producers are willing and willing to sell at a given price.

Offer price is the minimum price at which producers are willing and willing to sell a given quantity of an economic good.

If we assume that such questions are asked about all possible values ​​of prices or volumes, and the answers are plotted in the appropriate coordinates (Q - quantity, P - price), then the curve. connecting the obtained points is called the supply curve.

The law of supply: When the price of an economic good increases, the quantity supplied increases, that is, there is a positive relationship between the price of the good and the quantity supplied.

Mathematically, the supply law can be expressed by the supply function.

OFFER FUNCTION

The dependence of supply on the factors that determine it is called offer function .

The offer function can be represented as follows:

QSA =F(PA, PB, L, T, N,…)

where QSA- volume of supply of good A in a certain period of time

RA- the price of good A,

Rv...PZ- prices of other goods,

L- a value that characterizes technical progress,

T- value characterizing taxes and subsidies /

N- a value characterizing the natural and climatic conditions,

... - other factors influencing the offer.

If we imagine that all the factors that determine the supply of a product, except for the price of the product itself, do not change, then the supply function will take the form of a function of the supply of a product from its price.

QSA =Q(PA)

The supply function of the price, as well as the demand function of the price, can be represented in the following ways.

https://pandia.ru/text/80/079/images/image002_193.gif" align="left" width="293" height="157"> The slope of the supply line reflects the law of supply: As the price increases, the quantity supplied increases. Therefore, for most goods and services, the supply line has a positive slope.

The supply schedule can be obtained using the supply scale data or by plotting the function of supply against price.

In this case, the supply line demonstrates that at a price of P = 6 monetary units, the volume of supply of goods: will be QS = 16 thousand units per month; this state of the market corresponds to point A of line S.

If the price in the market drops to P=3 monetary units, the volume of supply will be reduced to QS=7 thousand units per month. This market situation is reflected by point B on the supply line.

Supply Curve Examples

When studying this topic, it is very important not to confuse such concepts as " sentence" and "amount of offer". The offer reflects the volume of planned sales at all possible levels of the price of a product or service, that is, it graphically represents the entire graph of the supply curve. The quantity supplied is the amount of a good that sellers are willing to sell at a particular price level and represents one point on the supply curve graph.

An increase in supply means that, at each price level, producers are willing to sell more of the good than before. When supply increases, the supply curve shifts to the right - down.

A decrease in supply means that, at each price level, producers are willing to sell less of the good than before. When supply decreases, the supply curve shifts to the left - up.

Knowing the equation or graph of the supply curve, one can determine the quantity supplied at any price. In this way:

Ø proposal change- this is a shift of the entire supply curve, that is, a change in the magnitude of supply for all possible values ​​​​of the price of an economic good;

Ø change in supply is the shift along the supply curve associated with a change in the price of an economic good.

When the price of a commodity decreases, producers will tend to offer less of it for sale. With an increase in the price of a commodity, the consequences are directly opposite (Fig. 2).

Fig.2 Consequences of changing the price of an economic good

Let us now consider non-price supply factors, that is, parameters that affect the planned sales volume of producers and cause a shift in the supply curve.

Non-price supply factors:

Resource prices;

Technology;

Subsidies;

Number of manufacturers;

Producer expectations;

Other factors.

Resource prices

The producer, in order to produce any product, must use economic resources. As we already know, the supply reflects the minimum price for which the manufacturer is willing to put a given volume of goods on the market. A change in the price of economic resources, ceteris paribus, will lead to an increase in the cost of production of this product.

Consequently, at a given price level, the producer will not receive the expected profit or will not cover the costs of its production at all. Thus, when resource prices rise, the producer will either have to increase the supply price at each of the levels of the quantity of goods, or reduce the supply at each of the possible price levels. In any case, the arrangement of this product on the market is reduced and the supply curve shifts to the left - up. Falling resource prices have the opposite effect.

Increasing resource prices Decreasing resource prices

Rice. 3 Consequences of changes in resource prices

Technology

Technology can be understood as a certain way of organizing the process of using economic resources to obtain a certain product or service. Thus, the improvement of technology can be considered the creation of a new method of production, which will make it possible, with the same amounts of resources, to produce a larger volume of products or, accordingly, the ability to produce the same volume of products with fewer resources. In this case, the manufacturer, of course, will be able to offer a larger volume of goods to the market at any of the possible price levels. Thus, with the improvement of the technology of production of goods, the supply of goods increases, and the graph of the supply curve shifts to the right - down.

Rice. 4. Consequences of changes in resource prices

It may seem that in modern world, in an environment of constant scientific and technological progress, situations of deterioration in technology are impossible. This is not true. There are quite simple examples:

Ø disaster seriously damages power lines and power plants themselves, thereby forcing a significant part of industries to return to the use of manual labor instead of machine tools;

Ø One company initiates and wins a lawsuit against another, accusing it of illegally using patented modern technologies, which leads the guilty firm to the need to return to outdated technologies before purchasing a license or developing their own solutions.

With the deterioration of the technology of production of goods, the supply of goods decreases.

Producer taxes

The price a producer receives for a product is his income. Taxes reduce the amount of this income of the producer, since he is now obliged to give some part of the price of the goods to the state. Thus, the imposition of a tax is tantamount for the producer to the fact that he will have to receive a lower price for each unit of goods sold. The introduction or increase of a tax leads to a decrease in the supply of goods. Reducing or eliminating the tax leads to an increase in the supply of goods.

Rice. 5 Consequences of changing the effect of taxes

Subsidies (transfers) to producers

Transfers increase the income of the producer, since now the state pays him some amount for each unit of goods. Thus, the introduction or increase of a transfer leads to an increase in the supply of goods, and a decrease or cancellation - to a decrease in the supply of goods.

Rice. 6. Consequences of changing the effect of transfers

Number of manufacturers

Obviously, twenty firms are able to offer more products to the market than one at the same price level. So than more number producers, the higher the market supply (with a decrease in the number of producers, the supply of goods is reduced).

Rice. 7. Consequences of changing the number of producers

Manufacturers' expectations

Producers' expectations about future changes in the markets affect their supply of goods at the present time. If, for example, a communication store expects that the price of mobile phones of a given model will increase in the future, how will it change their offer at the current time? Most likely, the seller will prefer to sell more goods in the future, receiving more for it. high price. Thus, the supply of this product today will decrease.

Rice. 8. Consequences of expecting a change in the price of a commodity in the future

If the manufacturer assumes that a new, improved model of a mobile phone will be released soon, then most likely the supply of the old model will increase at the current moment, of course, you have come across such a phenomenon as seasonal sales, when firms are actively trying to sell, let and at reduced prices, the remnants of old batches of products. Thus, different expectations of producers have a different impact on the supply /

Other factors

There are many other reasons that influence supply. This may be a change in the management of the company, the discovery of new mineral deposits, weather conditions, political events, etc. It is impossible to list and consider the influence of all possible factors in a change in supply, but we will try to summarize everything that we have learned about supply factors.

MARKET SUPPLY CURVE

ADDITION OF INDIVIDUAL SUPPLY CURVES

The number of producers has a positive effect on the market supply. By increasing the number of producers in the market, more economic good can be offered at each price level. In accordance with this statement, the addition of individual individual supply curves is carried out to obtain a general market supply curve: at each possible price level, it is necessary to add the values ​​​​of individual offers of individual producers. It is the magnitudes of individual sentences that are subject to addition, that is, the curved sentences "add up horizontally."

In order to add supply curves, you can use the following scheme:

1. Determine the minimum price value at which there is at least one seller on the market.

2. We note how much goods are offered on the market at a given price.

3. We determine at what price the next seller (or sellers) will join the sellers who operated on the market at the price of point 1.

4. We note how much goods are offered on the market by all sellers at a given price.

5. Repeat steps 3 and 4 until all sellers have entered the market.

Example 1

Consider an example of adding two supply curves when producers are ready to start offering goods at the same minimum price Pmin. The proposal of the first manufacturer is shown in fig. 9 by line 8. The offer of the second producer is represented by the line Under these conditions, the minimum price at which producers are ready to offer the goods is the same and equal to Pmin. Therefore, the minimum price on the total supply curve is Pmin. At a certain price level P2> Pmin, there are two producers on the market who are ready to offer, respectively, the volume of goods equal to: 1 02 =

Rice. 9 Individual and total

market supply curve

Fig.9. Individual and total supply curve

Example 2

Consider an example of adding two supply curves when producers are ready to enter the market at different minimum prices: Pmin1 and Pmin2. The proposal of the first manufacturer is shown in fig. 10 line S1, the proposal of the second manufacturer - line S2.

Under these conditions, the minimum price at which at least one producer is ready to offer a product on the market is the price of the first producer Рmin1 (since Рmin1< Рмин2). Следовательно, минимальная цена на суммарной кривой предложения - Рмин1.

The second producer begins to offer the product on the market when the price of the product rises to the level of Pmin2. At the same time, it is necessary to calculate how much volume is already offered on the market at a price equal to Pmax2. The second producer at this price only enters the market, that is, the volume of his supply is zero. However, the first producer at a price equal to Pmax2 offers a certain volume of goods, in order to calculate how much he offers, it is necessary to substitute the value of the price Pmin2 into the equation of the supply curve of the first producer.

Assume that at a given price, the first producer offers a volume of goods equal to Q1 at Pmin2. At a certain price Р2>Рmin2, both manufacturers are active in the market, ready to offer, respectively, the volume of goods equal to: Q2+Q3=Qryn.

https://pandia.ru/text/80/079/images/image014_21.jpg" width="411" height="251">

Rice. 10 Individual and total market supply curves

The equation of the total market supply curve can be derived analytically from the equations of the individual supply curves. To do this, you can use the following scheme:

1. Write down the equations of individual supply curves as functions: Q = Q(P).

2. Add the right parts of the obtained equations in accordance with the domains of definition.

3. Write an analytical curve market supply.

WORKSHOP FOR CONSOLIDATION OF THE THEME "OFFER"

1. The table shows the individual scale of the offer of vegetable oil. Derive analytically the proposition function if it is known that it is a continuous linear function.

Solution : First, make sure that the supply function presented in the table is linear. Indeed, an increase in the price of one unit leads to an increase in the quantity of goods by one constant value(two units). Let us write the desired function of the proposal in general view: Qs = a + b∙P. In order to find the unknown parameters a and b, it is necessary to substitute two combinations of price and quantity into the supply function: . We get that a=0 and b=2, whence Qs = 2∙P.

Answer : Qs= 2∙P.

2. The supply functions of three producers of goods are known: Qs1 = 1.5P - 1.5, Qs2 = 3P - 9, Qs3 = 5P - 25. Determine the market supply function, build a market supply curve.

Solution : When the price of goods 1≤P<3 на рынке будет действовать только первый производитель, то есть рыночное предложение составит Qs = 1,5P – 1,5. При цене 3≤Р<5 на рынке появится еще один производитель, и рыночное предложение на товар примет вид: Qs = 4,5P – 10,5. Наконец, при цене Р≥5 на рынке будут функционировать все три продавца, то есть рыночное предложение будет равно: Qs = 9,5P – 35,5.

Answer :

3. The supply functions of three producers of goods are known: Qs1 = 6P – 120; Qs2 = 8P - 400, Qs3 = 5P - 350. Determine the market supply function, build a market supply curve.

Solution : When the price of goods is 20≤R<50 на рынке будет действовать только первый производитель, то есть рыночное предложение составит: Qs = 6P – 120. При цене 50≤Р<70 на рынке появится еще один производитель, и рыночное предложение на товар примет вид: Qs = 14P – 520. Наконец, при цене Р≥70 на рынке будут функционировать все три продавца, то есть рыночное предложение будет равно: Qs = 19P – 870.

Answer : .

4. The manufacturer's offer could be represented as
Qs=2P-100. Two months later, the offer increased by 50%. Determine how much the value of the supply of goods has changed at a price of 80 rubles / piece. Determine how much the price at which the manufacturer is ready to offer 60 units on the market has changed. goods.

Solution : After the increase, the market supply was:
Qs"=1.5(2P–100)=3Р–150. We get that at a price of 80 rubles/piece, the market supply increased by (3∙80–150)–(2∙80–100)=30 pieces. Accordingly, the price that the consumer is willing to pay for 60 pieces of goods has decreased by (50 + 0.5∙60) - (50 + 1/3∙60) = 10 rubles/piece.

Answer : 30 pcs. and 10 rubles.

5. The supply of product X can be written as an equation: Qs = 4P - 1000. As a result of technology improvement, the supply increases by 20 units for each price. Determine the minimum price at which there will be a supply of goods after technological changes.

Offer- this is the amount of goods that sellers (producers) are ready to offer for sale at various prices at a given time.

Offer amount is the quantity of a good that sellers are willing to put on the market at a given price.

Offer price - the minimum price at which sellers agree to sell (put on the market) a certain amount of goods.

Law of supply It is expressed in the fact that, as a rule, ceteris paribus, the higher the price, the greater the supply.

The conditions under which the volume of supply is formed is called supply factors.

The supply factors are:

The price of this product (P).

Prices for other goods - compliments (P C) and substitutes (P S).

Production costs (C).

State production policy (taxes and subsidies) (G).

The level of technology, management and organization of labor (Tech).

Number of firms in the market (N).

Available production facilities (M).

Objective (external) conditions of production (O).

Market Information (Inf).

Manufacturers' expectations (E).

By analogy with the demand function, the supply function reflects the dependence of the supply on the factors that determine it:

Q S = f (P, P s 1 … R s n , R c 1 …R c m, , C, G, Tech, N, M, O, Inf, E).

Offer function from price: Q S = f(P).

Supply curve- a graphical representation of the relationship between the price of a product and the supply of goods on the market (Fig. 3.).

There is movement along the supply curve change in supply, when the price changes. Change of offer- this is a shift of the supply curve itself in some direction as a result of the action of non-price factors.

The response of supply to price is explained by the fact that:

firms in the industry, when prices rise, use reserve or quickly introduced new capacities, which leads to an increase in supply;

in the case of a steady increase in prices, other producers begin to enter this industry, which further increases the production and supply of goods.

As with the law of demand, there are exceptions to the law of supply. The most notable exception is labor market supply: With rising wages, people can afford to work less, allocating more time for rest and leisure. Thus, a situation arises when the increase in the hourly wage rate of labor above a certain level (w 0) does not compensate for the loss in the value of free time, which has to be sacrificed for the sake of work.

3. Interaction of supply and demand. Market balance.

The interaction of supply and demand, their coordination is carried out on the basis of the price mechanism and competition. This leads to the formation of market equilibrium and, consequently, the establishment of an equilibrium price.

Market equilibrium A position in the market where the demand for a product is equal to its supply. Only under market equilibrium are sellers and buyers willing to offer and exchange the same amount of goods and at the same time make transactions at the same price.

Market equilibrium is depicted using supply and demand curves (Fig. 4.).

Rice. four. Market balance.

With any deviation, the market tends to return to the equilibrium state.

When the actual market price deviates from the equilibrium price, there are such effects as shortage and surplus.

deficit is the excess of demand over supply at a price below the equilibrium price.

surplus- this is the excess of supply over demand, which occurs when the price is set above the equilibrium price (Fig. 1.5).

At the same time, both in a situation of unsatisfied demand (deficit) and a situation of excess supply, demand and supply, interacting with each other, lead the market to equilibrium.

When establishing a market equilibrium, it is important to determine who and to what extent benefits from market exchange. A graphical analysis of the gain from the exchange is shown in fig. 5.5. Let's start with consumers: any consumer would like to buy a product as cheaply as possible, but for each of them there is a maximum price that he is willing to pay for the product before leaving the market altogether. This price is called demand price(or in other words, reserve price).Reserve price is the highest price at which the individual is still willing to buy the good. Or in other words, the reserve price for a given individual is the price at which it is completely indifferent to him whether to buy a product or not. The set of demand prices of all consumers forms the market demand curve.

At the same time, all consumers, regardless of their demand prices, buy goods at a single market price. The difference between the individual bid price and the market price is consumer gain(consumer surplus) when buying a given unit of goods. But this is the gain of one consumer when buying a particular unit of goods. The gain for all consumers when buying the entire quantity of goods is equal to the area of ​​\u200b\u200bthe figure bounded by the demand curve, the market price line and the 0Y axis.

Rice. 5.10. Consumer benefit and

manufacturers win.

Now let us determine what the producers of goods gain in the process of exchange. Any manufacturer would like to sell the product for the highest possible price, but for each of them there is a minimum price at which he is still willing to sell before he leaves the market. This price is called offer price. The sum of the supply prices of all producers forms the market supply curve.

At the same time, all producers, regardless of their offer prices, sell goods at a single market price. The difference between the market price and the individual offer price is manufacturer's gain(producer surplus) when selling a given unit of goods. The payoff for all producers is geometrically equal to the area of ​​the figure bounded by the supply curve, the market price line and the 0Y axis.

Thus, voluntary market exchange at the equilibrium price benefits both buyers and sellers. And any market changes, and the social consequences of the use of various instruments of state regulation, and the differences between market structures can be assessed in terms of changes in the payoff of consumers and producers in each of the situations.

Law of supply expresses direct the relationship between the price and quantity supplied of a good over a given period of time.

The law of supply states that as prices rise, so does the quantity supplied; as prices fall, so does supply. Supply is influenced by both price and non-price factors.

The relationship between prices and the amount of goods that producers are willing to produce and sell is called the schedule or supply curve. The higher the price, the greater the supply of goods, ceteris paribus, because the producer seeks to increase his income. However, at a very high price, a sufficiently large income can be obtained without increasing production. In this case, the offer may be reduced.

The law of supply has two forms of expression: a) sentence scale; b) supply curve.

Offer Scale- this is a tabular expression of the relationship between the market price of a good and the quantity that sellers will offer at this price.

Supply curve - it is a graphic expression of the relationship between the market price of a good and the quantity that sellers will offer at that price.

The supply curve reflects the relationship between the amount of a good offered and its price. It illustrates what price must be paid per unit of the offered good for each quantity of the good in order for this quantity of the good to be released, that is, offered to the market. For most goods, the supply curve has an "ascending" and "concave" shape.

The ascending supply curve expresses the essence of the law of supply, which lies in the fact that for a significant amount of goods, the higher the price for them, the greater the amount of goods offered by producers in the market.

The “concavity” of the supply curve is explained as follows: with an increase in the price of a good, an increasing number of firms participate in its release, thereby causing a significant increase in the volume of the proposed good. As the price of the good rises, at a certain stage the market will be oversaturated with it and the expansion of the output of the good will stop; as a result, the output of goods stabilizes regardless of the price level. If the price continues to rise, the supply curve will become vertical.

SUPPLY FACTOR - an increase in the available amount of a resource, an increase in its quality, or an expansion of technical knowledge, technological capabilities, innovations that create the possibility of producing a larger volume of goods and services, contributing to an increase in their supply.

Price factor - a change in the supply value is affected by a change in the price of a given good in the market. (Qs)=f(P), where Qs is the total volume of supply; P is the price per unit of this good in the market.

Factors affecting supply (non-price)
1. Prices of factors (resources) of production
2. Production technology
3. Producer price and deficit expectations
4. Amount of taxes and subsidies
5. Number of manufacturers

OFFER FUNCTION-dependence between the amount of offered goods and his at the price, and others factors affecting the volume suggestions, are taken constant. The term " scale suggestions".

The supply function S(p) describes the relationship between the market price of a good and its supply on an isolated market for that good. In the general case, one should proceed from the fact that the product in question is produced by a sufficiently large number of enterprises competing with each other. In such a situation, it is natural to assume that each producer seeks the greatest profit, and his individual output of a product increases as the price of this product rises. But then the total supply of goods on the market S(p), as the sum of individual outputs, is an increasing function of price, i.e. S′(p)>0.

9) Interaction of supply and demand. Models of Walras and Marshall: content and comparative characteristics. Equilibrium price and equilibrium quantity.

INTERACTION OF DEMAND AND SUPPLY is a process that generates the formation of a market price that satisfies both the seller and the buyer at the same time.

The market price reflects a situation where the plans of buyers and sellers in the market completely coincide, and the amount of goods that buyers intend to buy is absolutely equal to the amount of goods that producers intend to offer. As a result, an equilibrium price arises, i.e., the price of such a level when the volume of supply is equal to the volume of demand.

In a market equilibrium of supply and demand, there are no factors either to raise or lower the price as long as all other conditions remain equal.

Rice. Interaction of supply and demand

Offer- this is the quantity of goods that sellers (producers) are ready to offer for sale at a given price at a given time.

Offer amount is the quantity of a good that sellers are willing to offer in the market at a given price.

Law of supply It is expressed in the fact that, as a rule, ceteris paribus, the higher the price, the greater the supply.

The conditions under which the volume of supply is formed is called supply factors .

The supply factors are:

• The price of this product (P) -) - (price factor) ;

• (non-price factors):
• Prices for other goods - compliments (PC) and substitutes (PS);
• Production costs (C);
• State production policy (taxes and subsidies) (G);
• Level of technology, management and labor organization (Tech);
• Number of firms in the market (N);
• Available production facilities (M);
• Objective (external) conditions of production (O);
• Market information (Inf);
• Manufacturers' expectations (E).

By analogy with the demand function, the supply function reflects the dependence of the value "S" on the factors that determine it:

Q S \u003d f (P, P s 1 ... P s n, P c 1 ... P c m, C, G, Tech, N, M, O, Inf, E).

Offer function from price:

Q S = f(P).

In linear form, the supply function has the following form:

c- the minimum supply of goods on the market,

d- the dependence of the change in the proposed volume of goods on the change in price (simultaneously reflects the slope of the supply curve),

p- the price of the goods.

The plus sign in the formula indicates a positive slope of the supply curve.

Supply curve- a graphic representation of the relationship between the price of a product and the supply of goods on the market.

There is movement along the supply curve change quantities suggestions, when the price changes.

The response of supply to price is explained by the fact that:

Firms in the industry, when prices rise, use reserve or quickly introduced new capacities, which leads to an increase in supply;

In the case of a steady increase in prices, other producers rush into this industry, which further increases the production and supply of goods.

The supply curve is built on the assumption that all factors, except for the market price, remain unchanged. It has already been indicated above that, in addition to price, many other factors influence the volume of supply. They are called non-price. Under the influence of a change in one of them, the quantity supplied changes at each price. In this case, they say that there is a change in the proposal. This is manifested in the shifting of the supply curve to the right or left.

When the supply expands, then the curve S 0 shifts to the right and occupies position S 1, in the case of contraction of supply, the supply curve shifts to the left to position S 2.

Among the main factors that can change supply and shift the S curve to the right or left are the following (these factors are called non-price determinants of supply):

1. Prices of resources used in the production of goods. The more an entrepreneur has to pay for labor, land, raw materials, energy, etc., the lower his profit and the less his desire to offer this product for sale. This means that with an increase in prices for the factors of production used, the supply of goods decreases, and a decrease in prices for resources, on the contrary, stimulates an increase in the quantity of goods offered at each price, and the supply increases.

2. Level of technology. Any technological improvement, as a rule, leads to a reduction in resource costs (lower production costs) and is therefore accompanied by an expansion in the supply of goods.

3. Goals of the firm. The main goal of any firm is profit maximization. However, often firms may pursue other goals, which affects the supply. For example, a firm's desire to produce a product without polluting the environment may lead to a decrease in the quantity offered at every possible price.

4. Taxes and subsidies. Taxes affect the costs of entrepreneurs. An increase in taxes means an increase in production costs for a firm, and this, as a rule, causes a reduction in supply; reducing the tax burden usually has the opposite effect. Subsidies lead to a reduction in production costs, so an increase in business subsidies certainly stimulates the expansion of production, and the supply curve shifts to the right.

5. The prices of other goods can also affect the supply of a given good. For example, a sharp increase in oil prices can lead to an increase in the supply of coal.

6. Expectations of manufacturers. Thus, producers' expectations of a possible increase in prices (inflationary expectations) have an ambiguous effect on the supply of goods. The proposal is closely related to investments, and the latter are sensitive and, most importantly, unpredictably react to market conditions. However, in a mature market economy, the expected rise in prices for many goods causes a revival in supply. In-flation in a crisis usually causes a decrease in production and a reduction in supply.

7. Number of producers (degree of market monopolization). The more firms produce a given product, the higher the supply of this product on the market. And vice versa.

Just as in the case of the impact on demand of price and non-price factors, they share a change in supply and a change in the magnitude of supply:

A change in non-price factors leads to a shift in the supply schedule itself to the right or to the left, since in this case, manufacturers at each price offer the market a different (more or less) quantity of this product. Such changes in supply can occur only in the event of changes in non-price determinants of supply. Here we are talking about proposal change;

Whenever, as a result of some changes in the market situation, the supply value changes, and all the factors affecting it, except for the price of commodity X, remain unchanged, the supply curve for the commodity remains in the same place, there is a movement along the curve suggestions. In such cases, ceteris paribus, the quantity of goods X offered by producers for sale changes. Here we are talking about change in supply.

As with the law of demand, there are exceptions to the law of supply. The most notable exception is labor market supply: With rising wages, people can afford to work less, allocating more time for rest and leisure. That is, an increase in the hourly wage rate of labor above a certain level (w 0) does not compensate for the loss in the value of free time, which has to be sacrificed for the sake of work.

Another analogy with demand is the existence of individual and aggregate (market) supply. The aggregate supply in the market is obtained by summing up the supply of individual producers and sellers of a product or service.