Lecture 3-Price Theory Supply.pdf

Lecture 3-Price Theory Supply.pdf - LECTURE 3 PRICE THEORY...

This preview shows page 1 - 12 out of 35 pages.

LECTURE 3 PRICE THEORY - SUPPLY
Image of page 1

Subscribe to view the full document.

Price Theory - Supply Unlike the demand in which it deals with consumer behaviour, the supply theory deals with the behaviour of firms. As the objective of business firms to obtain profits, supply decisions depend on profit potential.
Image of page 2
Price Theory - Supply Supply is “The quantity of goods and services willing to be produced by firms or offered for sale at a particular time or particular place at alternative prices”
Image of page 3

Subscribe to view the full document.

Price Theory - Supply Quantity supplied is the amount a particular product that a firm would be willing to offer for sale at a particular price during a given time period. Generally, an increase in the market price, ceteris paribus, leads to an increase in the quantity supplied. Conversely, a decrease in the market price, ceteris paribus, leads to a decrease in the quantity supplied.
Image of page 4
Supply Function The quantity supplied of a good X depends solely on: The price of good x (Px) The supply of good X depends on: The prices of other goods (Py) The prices of factors of production (Pf) The state of technology (T) Other relevant factors (z)
Image of page 5

Subscribe to view the full document.

Supply Function In general, the supply function can be written as: Sx = f (Px, Py, Pf, T, Z) or Sx = f (Px) c.p. Sx = f (Py, Pf, T, Z) c.p. c.p = ceteris paribus
Image of page 6
Supply Schedule Supply Schedule refers to a table that shows how much of a product that firms will produce/sell at different prices. The table in the next slide shows the quantities of soybeans that an individual farmer might sell at various prices.
Image of page 7

Subscribe to view the full document.

Supply Schedule Price per bushel ($) Quantity Supplied (bushels per year) 1.50 0 1.75 10,000 2.25 20,000 3.00 30,000 4.00 45,000 5.00 45,000 The farmer‟s supply schedule for Soybeans
Image of page 8
Supply Curve The information in the supply schedule may be presented graphically in a supply curve. By joining the points, we can trace an upward sloping supply curve There will movements along the supply curve if there are changes in the price level.
Image of page 9

Subscribe to view the full document.

Supply Curve s Qty Supplied (‘000 ) Bushels of soybean produced Price($) 1.50 1.75 2.25 3.00 4.00 0 10 20 30 45 5.00
Image of page 10
Supply Curve It is observed that:
Image of page 11

Subscribe to view the full document.

Image of page 12

{[ snackBarMessage ]}

Get FREE access by uploading your study materials

Upload your study materials now and get free access to over 25 million documents.

Upload now for FREE access Or pay now for instant access
Christopher Reinemann
"Before using Course Hero my grade was at 78%. By the end of the semester my grade was at 90%. I could not have done it without all the class material I found."
— Christopher R., University of Rhode Island '15, Course Hero Intern

Ask a question for free

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern