CHANGE IN QUANTITY SUPPLIED AND CHANGE IN SUPPLY

CHANGE IN QUANTITY SUPPLIED AND CHANGE IN SUPPLY

A change in the quantity supplied of a commodity means a movement from one point to another on a supply curve. The cause of the change in the quantity supplied is as a result of the change in the price of the commodity under consideration. The quantity of a commodity supplied changes with price. More is supplied at a higher price than at a lower price.

A change in the quantity supplied is of two types:

There is an increase in the quantity fried if the quantity supplied increases as a result of an increase in the price of the commodity.

(b)        Decrease in the quantity supplied: In this case, there is a decrease in the quantity supplied if the quantity of the commodity supplied decreases as a result of a decrease in price.

SHIFT OR CHANGE IN SUPPLY

A shift or change in supply in economics is quite different from a change in the quantity supplied as discussed in unit 21.10 of this chapter. There is a change in supply if the supply curve shifts to an entirely new position. In this case, there is completely new supply schedule and supply curve, showing that at the old price, more or less of the commodity would be supplied. A shift or change in supply is determined by the factors affecting supply except the price of the commodity.

A shift or change in supply is also grouped into two divisions:

  • Increase in supply: When there is an increase in supply, the supply curve will shift to the right, indicating that at the old price, more of the commodity will be supplied.
  • An increase in supply is brought about by a favourable change in the factors affecting supply other than the price of the commodity. For example, if there is improvement in the level of technology, more of the commodity is likely to be supplied at the old price.

(b)     Decrease in supply: When there decrease in supply, the supply curve will the left, indicating that at the old price, less of the commodity is being supplied.

A decrease supply is brought about by an unfavorable  change in any of the factors affecting supply except the price of the commodity. Fore: if there is a change in taxation, e.g. increase in taxation against a commodity, the supply will fall, at the former price.

          EXCEPTIONAL (ABNORMAL SUPPLY)

Exceptional or abnormal supplies are patterns which do not abide by the laws of supply and therefore give rise to the reverse the basic laws of supply.

A normal supply slopes upwards from right to left, showing at a higher price, more of a commodity will be supplied. But an abnormal supply curve does not follow this rule.

An abnormal supply also called a regressive or backward sloping supply curve, does not slope upwards continuously  from right to left (Fig. 21.11) thus showing that at a higher prices, less quantities will be supplied. That is a negative situation in which a fall in the price of the commodity leads to an higher expansion of its supply.

Causes of abnormal supply

  1. Existence of some fixed assets: Land is a fixed asset. With time the price of land increases without a corresponding increase in its size. This situation can lead to abnormal supply curve as seen in fig. 21.13. this is an example of a fixed supply curve or zero elastic or perfectly inelastic supply curve.
  2. Rising wages: As wage rate increases, labour would at first increase its effort and the length of time they are willing to work.
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  6. After a certain wage rate, labour is no longer willing to increase the number of hours worked. They decrease the number of hours they will work at a higher wage rate leading to a supply curve that has more than one slope. This type of curve is known as backward-sloping supply curve.
  • Target income: This situation is more applicable to agricultural products. A farmer who aims at a particular income target may go on supplying the market even when prices fall. Also when prices rise so high that he can quickly attain his target income, he can cut back on supplies.
  • Monopolistic practices: A sole supplier of a product to a market may hold back supplies even when prices are rising, to push prices still higher up.

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