What is supply and its factors

Supply is an important concept of micro economics.Supply is quantity of goods and services which producer is ready to sell in market. “Supply means the quantity of a good which is available in market to sale at a certain price”. The concept of the supply cannot be discussed without the price of such good.

Factors of Supply:

To understand the concept of supply following factors should be considered:

Price of Good:

Quantity supplied of a good is closely related to its price. Any change in price of a good will cause an affective change in its quantity supplied.

Reserve Price:

The minimum price level at which seller is willingReserve Price to sale his good is called reserve price. Below reserve price the seller refuses to sale his/her product or good.

Increasing Function:

Supply of the good increases with the increase in its price and decreases with the decrease in its price. So supply is an increasing function of price.

Period of Time:

The quantity supplied according to its time period is divided into following parts:

Fixed Supply or Market Period Supply:

In this supply perishable goods are considered. E.g. vegetables, fruit, milk etc. there supply remains fix in day by day.Fixed/Market Period Supply

Short Period Supply:

In this type the supply of the goods can be adjusted Short Period Supplyup to certain limit. In short period, supply of the goods is available only for a certain limit which can be stored. New firms and factories cannot start their business in such short period.

Long Period Supply:

In this period supply of the good can be adjusted according to change in its demand. The goods supplies can be stored up to infinite time. New firms and factories can initiate their business in this period.Long Period Supply


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