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• Supply Curve


  A schedule showing a direct or positive relationship between the price of a commodity and level of output that the seller is willing to supply at a given point in time, other things held constant

  
• As price of the commodity increases, there will be more sellers that will be included to supply the good and as the price of the commodity decreases, there will be lesser sellers that are willing to supply the good in the market
• Factors affecting the supply of a commodity

  • Price of production
  • Taxes
  • Technology
  • Expectation
  • Prices of production inputs
• Prices of production inputs


  Intermediate or raw materials and factor inputs
• Intermediate inputs


  Raw materials that are still going to be processed or transformed into higher level of outputs
• Factor inputs


  Processing or transforming inputs e.g. labor, land, capital, entrepreneurship
• When the price of production inputs increases

  There will be an increase in the cost of production at every level of production, and sellers will be reluctant to maintain their previous level of supply
• If the cost of capital as indicated by interest rate has been lowered

  This may encourage sellers to produce more because the cost of one of its factor inputs has become inexpensive
• Taxes


  Business establishments are required to pay a number of taxes to various levels of government, which can be considered as part of cost of production
• An increase in sales tax, real estate tax, and other business taxes

  Can increase the costs of supplying a commodity, which may discourage the sellers to increase their supply of the commodity in the market
• Technology


  The manner in which various factor inputs process the raw material, which can be labor-intensive or capital-intensive
• Improvements in technology used by some firms

  Can lower their production costs and make them more competitive, which may encourage them to supply more of the commodity at a reduced price
• Expectation


  Factors that may influence the demand for a commodity, such as cultural values, peer pressure, and power of advertising
• The supply curve is upward sloping due to the principle of diminishing marginal productivity and increasing marginal costs
• Principle of diminishing marginal productivity and increasing marginal costs

  As the production of goods increase, not only does its total cost increase, but the additional or marginal cost increases as well, due to the declining productivity of additional units of a variable input (labor) when combined with a fixed input (capital or land)
• Changes in the supply curve

  • Movement along the supply curve
  • Shifts in the supply curve

  
• Movement along the supply curve


  Changes in the price of the commodity, causing a movement towards northeast (increase in price and quantity) or southwest (decrease in price and quantity) along the supply curve

  
• Shifts in the supply curve


  Changes in factors affecting supply other than the price of the commodity, such as an increase in the minimum wage (shift to the left) or a bountiful harvest (shift to the right)