1. Supply refers to the quantity of a good or service that producers are willing to offer for sale at different possible prices over a period of time. 2. The supply curve graphs the relationship between price and quantity, with quantity supplied increasing as price increases. 3. Factors that can shift the supply curve include input prices, technological changes, government policies, weather, expectations about future prices, and the number of producers in the market.

1. Theory and law of supply
Heera KC
MSc. Nursing(Midwifery)
PBN 2nd year, Co-ordinator

2. Meaning of supply
• Supply refers to the quantity of commodity offered for sale
considering different possible prices at a point of time.
• “The supply of goods is the quantity offered for sale in a
given market at a given time at various prices”
Thomas

3. Cont...
• Supply is a fundamental economic concept that describes the
total amount of a specific good or service that is available to
consumers.
• Supply can relate to the amount available at a specific price or
the amount available across a range of prices if displayed on a
graph.
• This relates closely to the demand for a good or service at a
specific price; all else being equal, the supply provided by
producers will rise if the price rises because all firms look to
maximize profits.

4. Supply and quantity supplied
• Supply refers to the whole set of quantities of a commodity
offered for sale corresponding to different possible prices at a
point of time.
• Quantity supplied on the other hand refers to a particular amount
of a commodity offered for sale at a particular price at a point of
time.

5. Cont...
Supply schedule can be shown as points on a graph.
The graph lists prices on the vertical axis and quantities
supplied on the horizontal axis.
Each point on the graph shows how many units of the product or
service a producer (or group of producers) would willing sell at a
particular price.
The supply curve is the line that connects these points.

7. Factors affecting supply of
commodity/Changes in Supply Curve

8. Cont...Input prices/ resources cost:
If the wages of physicians were to rise, this increase in an input cost
would result in suppliers’ willingness to offer as much for sale at the
original price. The supply would decrease, shifting the curve to the left.
• Technological change:
As technology improves for producing a healthcare product, the goods
become cheaper to produce.
Certainly, technological changes that make products more costly without
improving quality are ignored.
As the product becomes cheaper to produce, suppliers are willing to
offer more for sale ata given price. This increases supply, thus shifting
the supply curve to the right.

9. Supply of office visit by physician: physicians would be willing to offer ten office
visits if the price were $90 per visit. At a higher price, say $100, more visits would

10. Prices of production-related goods:
The price of a good related to production, such as a rise in
the price of radiology services, also would be relevant.
Because physicians can use radiology for diagnosis as well
as treatment, this will cause the supply to decrease, thus
shifting the supply curve to the left.
· Size of the industry:As more firms enter the market, the
supply of the product will be greater.

11. Government policies: Government intervention can take many
forms including environmental and health reguations, hour and
wage laws, taxes, electrical and natural gas rates and zoning and
land use regulations.
• These regulations can affect a good's supply.

12. • Weather: For a number of products, acts of God such as
weather will tend to affect production. The direction of
the effect is obvious: good weather increases supply.
• Expectations: Sellers' expectations concerning future
market conditions can directly affect supply.
• Goal of the firm: Maximize the profit or maximize the
output or employment

13. – Subsidies and taxes: government subsides encourage production, while taxes
discourage production
– Technology: Better the technology lower the cost of production →more
production →more supply
– Other goods: businesses consider the price of goods they could be producing.
Generally higher the price, higher the quantity supplied and vice versa.
– Number of sellers: Higher the number of firms leads to increase the supply.
– Expectations: businesses consider future prices and economic conditions
– Resource costs: cost to purchase factors of production will influence business
decisions.
( STONER: factors that shift the supply curve)

15. Law of supply
• The law of supply is the microeconomic law that states that, all
other factors being equal, as the price of a good or service
increases, the quantity of goods or services that suppliers offer
will increase, and vice versa.
• The law of supply says that as the price of an item goes up,
suppliers will attempt to maximize their profits by increasing the
quantity offered for sale.

16. Law of supply
• Assumptions of the law:
 No change in price of the factors of production.
 No change in technology.
 No change in the goal.
 No change in the price of related goods.
 No expectation of change in the price in the future.

18. Relationship between demand and supply
• As the price for a good rises, the quantity supplied
rises and the quantity demanded falls.
• As the price falls, the quantity supplied falls and the
quantity demanded rises.
• The law of supply holds that producers will
normally offer more for sale at higher prices and less
at lower prices.

20. Cont...