Download SUPPLY In the world of business supply means the amount of a

SUPPLY
In the world of business supply means the amount of a commodity or service that producers are willing to sell in the market under various
conditions.
Economists are concerned with the market as a whole. They want to know how much of a certain economic product sellers will supply at each
and every possible market price. Supply may be defined as schedule of quantities that shows how much of a product setters will supply at different
prices. Everyone who offers an economic product tor sale is a supplier.
In economics the relationship of supply and price is expressed by the Law of Supply The Law of Supply says that the quantity of an economic
product offered for sale varies directly with its price. It describes the relationship between prices and the quantity of goods or services that would be
offered for sale at all of the possible prices that might prevail in the market. In other words suppliers will offer greater quantities for sate at a higher
price and less at a lower price.
Higher prices lead to an increase in quantity supplied. When quantity supplied exceeds quantity demanded at current price, the price tends to
fall and quantity supplied decreases.
This can result in serious difficulties for many producers, and may cause them to go out of business completely. Over-production of any
comodity can also create difficulties, because it can lead to a glut in the market, which may cause prices to drop sharply.
Supply of many commodities can generally be adjusted to suit market conditions. This means that changes in prices lead to changes in the
quantity supplied that can be increased or decreased rapidly in response to market prices.
Supply, it may be said, is determined and influenced by price. But it is also determined by such factors as the cost of production and the period of
time allowed to supply to adjust to a change in prices.
To calculate costs a business must know what inputs in what combinations it needs to produce its product and how much those inputs cost. That
is businesses must know the technology of production and they must know input prices. Costs are determined by input prices and technologies of
production. In economic theory costs are divided into several different categories. Fixed cost means the cost that a business incurs even if the plant is
idle and output is zero. It makes ho difference whether the business produces nothing, very little or a lot. In other words fixed costs are not related to
the level of production and don't change with the output of a business.
Fixed costs include salaries paid to executives, interest charges on bonds, rent payments on leased properties, local and state property taxes,
depreciation - the gradual wear and tear of capital goods with the run of time.
Variable cost means the cost that changes with changes in the business rate of operation or output. Thus, variable costs depend on the level of
production.
Total cost is the sum of the fixed and variable costs. It includes all the costs a business faces in the course of its operation
Marginal cost is the most important of all costs. Marginal cost means the extra or additional cost incurred when a business produces one additional
unit of a commodity. Since fixed costs do not change , marginal costs is the increase in variable cost that results from the production of one more unit
of output.
In economic analysis, these other factors are often assumed to be constant. This assumption enables supply and price to be related in what is
called the supply function. The graphical representation of supply function is the supply curve. It shows the positive relationship between the price
and quantity of a good supplied during a given period. The suppy curve tells how many units of a particular commodity or service would be offered
for sale at various price. The supply curve slopes upwards from left to right.
It is very important to know the distinction between supply and the quantity supplied. Supply describes the behaviour of sellers at every price.
The term "quantity supplied" refers to the amount of a good supplied at a given price.