REQUIREMENTS FOR SUPPLY,

 

REQUIREMENTS FOR SUPPLY

1. Sellers present

A market's supply of a good or service will be more plentiful the more vendors there are, and the reverse. When a result, as the number of sellers increases, supply grows and the supply curve moves to the right. While fewer sellers will result in less supply and a leftward change in the supply curve. For instance, as more businesses enter a market, there are more sellers, increasing the supply.

2. Resource prices

Resources are more expensive, which drives up manufacturing costs and, in turn, reduces earnings. Profit is a primary incentive for producers to provide goods and services, therefore an increase in profits will result in a rise in supply and a drop will result in a decline. In other words, supply and resource prices are inversely related. When resource prices rise, the supply is constrained and the supply curve is shifted to the left; when they fall, the supply is expanded and the supply curve is changed to the right.

3. Taxes and Financial Aid

Taxes cut profits, hence raising taxes decreases supply while lowering taxes increases it. Subsidies lessen the financial strain that production costs place on suppliers, enhancing profits. As a result, increasing subsidies lead to increased supply while decreasing subsidies lead to decreased supply.

4. Technology 

Increasing manufacturing efficiency is made possible by technological advancements. Consequently, the production costs will be lower, and profits will rise. Supply is increased as a result, and the supply curve is moved to the right. It goes without saying that declining technology reduces supply because, in general, technology rarely degrades.

5. Expectations from Suppliers

A supplier's current supply may be impacted by changes in their expectations for the price of a good or service in the future. The impact of suppliers' expectations on supply, however, is hard to generalize in contrast to other supply-side factors. For instance, farmers may withhold their agricultural products to take advantage of higher prices when they anticipate an increase in crop prices in the future, hence lowering the supply. Manufacturers will use more resources to boost their output when they anticipate future price increases, which may also raise the current supply.

6. Costs of Connected Products

Companies that can produce related products (such air conditioners and refrigerators) will then switch their manufacturing to a product whose price is significantly higher than other related products. resulting in a decrease in the supply of the previously produced product(s). For instance, Hockey sticks are frequently made by the same company that makes cricket bats. The company will create more hockey sticks and fewer cricket bats when the price of hockey sticks rises. Consequently, the Bats for cricket will be in shorter supply.

7. Joint Product Prices

The supply of all jointly produced items will increase when two or more goods are created in a joint process and the price of any one of the products rises, and vice versa. For instance, a rise in the price of beef will result in more leather becoming available.

Types of Demand: Additional Important Information

1. Demand for consumer products against demand for producer goods

Consumer goods are products that meet basic human requirements. These products are offered for final consumption and provide immediate gratification. Example: Apple, Rice, and Bread

Producer goods are those that are used to make consumer goods and provide customers with indirect satisfaction.

2. Derived vs. Autonomous Demand

Autonomous demand is the term used to describe the direct demand for products and services. It is a separate demand.

Ex: Autonomous demand is the demand for higher education.

The term "derived demand" refers to the demand for items whose demand is based on the desire for the primary commodities.

3. Demand for durable goods versus that for perishable items

Durable goods are ones that remain functional for an extended period of time. Ex: TV. furniture, computers, etc.

Products classified as perishable have a shelf life of a few hours or days. such as milk, bread, fish, etc.

4. Industry demand vs firm demand

The company only has one business division. Firm demand is the total amount of items that one firm wants. The term "industry" describes a collection of businesses making related products. Industry demand is the quantity needed by industry (all businesses). An example of strong demand is a college's desire for computers. All colleges' demand for computers is referred to as industry demand.

5. Short – run demand Vs Long – run demand 

Short – run refers to shorter duration. In short-run, additional changes cannot be initiated in terms of expansion of the business. In this period, the firm can adjust their production by changing variable factors such as materials and labor. Fixed factors such as capital, technology etc., cannot be changed. The long-run is a period relatively long so that all factors of production including capital can be adjusted to meet the market requirements.

6. Replacement demand vs new demand

With regard to existing stock, fresh demand is the demand for brand-new products. The item is bought because it needs to be replaced in order to keep the asset in excellent shape. Ex: The desire for new cars is known as new demand, and the demand for replacement parts is known as spare part demand.

7. Market demand overall versus market demand by segment

Total market demand refers to the demand for a product across the entire market. Segment market demand is the term used to describe the demand for a product from a certain geographic region, age group, or income bracket of consumers. 

Ex: The whole market demand for sugar is the demand for sugar throughout the entire state of Telangana. Sugar is in high demand in Hyderabad's niche market.