Theory of Demand~~~~ Part 2

Demand is pointless without the supply of the G&S. Imagine, you went to a grocery store wanting to buy some chicken, fish, rice and noodles; only to discover that their shelves are empty... Not a pleasant sight. Thus, we will be talking about supply.

Supply can be defined as the quantities of goods that sellers are willing and able to sell at various prices over a period of time.

There are few factors that determines the supply of G&S; one being the price.

PRICE: The higher the price, the higher quantity supplied; Cetirus paribus. Frankly speaking, who would not want to produce more of the G&S if you could sell it at a high price? The higher the price would lead to a higher profit for the producers. Hence, they would want to sell more.

Original price and Qs was P1 and Qs1 (at pt A)
If it were to increase from P1 to P2, Qs1 would also increase to Qs2 (at pt B)
Since there is a change in price of the G&S, the point moves along the SS curve.







However, if the determiners were NOT the price, then the SS curve would, instead, SHIFT. One of the determinate s would be the cost of production.

COST OF PRODUCTION: This could either come from the change in raw materials or even due to the improvements of technology; making production more efficient.

If the COP were to increase; due to an increase in wages, the SS curve would shift to the LEFT; from S1 to S2.  At the original price, the firm could make Q1 of G&S(at pt A). However, after the shift, even at the same price they could only supply Q2, which is less.

The SS curve can also shift to the right. This would be due to an increase in efficiency.

Before, saw that the Qs had decrease from Q1 to Q2. This time, it has instead increase from Q1 to Q2 at the same price, as the SS curve has shift to the RIGHT(S1 to S2).

Other contributing factors to the SS curve would be the size and nature of the industry(if the firm supplies good G&S, it would make it easier for them to enter a new market), the attractiveness and availability of other products(this would mean goods that complement each other, a.k.a, Complement goods) A good example of this would be between cars and petrol. Once you buy a car, it's complement would be the petrol. Thus, if the Qs of cars increases, the SS of petrol would shift to the right.

Similar to the DD curve, there are also exceptions for the SS curves. WR-Wage Rate. WH-Working Hours

This only applies to INDIVIDUAL WORKERS SS CURVE. For low level income people,(below $10) income is more important than leisure, thus an increase in Price for everyday G&S would lead to an increase in WH.
However, for the high level income people(a.k.a; flthy ars people) with WR above $10, leisure would become more important than income, therefore, for an increase in come would lead to a decrease in working hour......I know quite confusing.

Imagine it this way. When you're earning a handful of cash per month, you work for only 7 hours. So when you need to earn more, you work 9 hours.
IF you are a high level income individual, you can just stay at home and leave the rest of the work load to your subordinates.(LIKE A BOSS). Thus, you only have a few working hours, and yet you're earning like mad...

In my opinion, firms needs to pay a lot of attention to the trend of the SS curve, whether t is shifting to the left or to the right. If to the right, the firm has a big advantage as they now can sell at a higher price for the same amount of Qs, leading to an increase in TR(total revenue). If it shifts to left...well...don't panic and just try to minimize the shift, otherwise the firm will be in big trouble...

In conclusion, there are also many factors that affects the SS curve, like the DD curve, but the most important part of the SS curve would be the shift, and not the movement along the SS curve.