Law Of Supply Assignment For Students

Law Of Supply Assignment Help

When studying economics, one of the most prominent chapters you'll come across is about demand and supply. If you want to get good scores on the subject, then learning this topic is a necessity. That said, it’s possible for you to have confusion about this theory, but that’s doesn’t you have to sleepless nights trying to decipher it.

If you're looking for resources to simplify this concept, your search ends here. We have put together a detailed and simple explanation of the law of supply and how it impacts businesses. Let's delve into it further.

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What is the law of supply?

The law of supply is a general principle in economics that emphasises that considering every factor as constant, a sharp increase in the price of products will lead to a corresponding direct increase in the supply. This principle applies to a decrease in prices as well.

The law of supply highlights the producer’s behaviour when the price of a product or service rise or reduce. With a rise in price, the tendency is to maximise the supply because there’s now more profit to be earned. On the other hand, when prices reduce, producers tend to reduce production owing to the minimised economic opportunity for profit.

This theory essentially defines the connection between the price of a given product or item and the willingness of people to either sell or buy it. As the price increases, people are inclined to supply more and demand less and vice versa when the price falls.

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What is the law of supply and demand?

The law of supply and demand is a concept that focuses on the interaction between the sellers of a resource and the buyers for that resource. The theory describes the connection between the price of a product or item and the inclination of people to either buy or sell it. Typically, as price increases, the supply rises, and demand reduces and vice versa when the price reduces.

The theory depends on two different laws, the law of demand and the law of supply. The two laws converge to detect the actual market price and volume of products on the market.

• The law of demand indicates that at higher costs, the demand for a product will be less from buyers.
• The law of supply suggests that at higher prices, sellers will supply more of the product.
• Some independent factors can influence the shape of market demand and supply, influencing both the quantities and prices that we observe in markets.

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How to explain the law of supply?

Law of supply highlights a relationship between the price of a product and supply. It indicates a direct relationship between the product price and its supply if other factors are unchanged. If the price of a product rises up, sellers would prefer to increase the production of the product to earn profits, which automatically ensures an increase in supply.

Again, if the price of the product reduces, the suppliers would lower the supply of the product in the market as they would wait for an increase in the price of the product in the future. It points to the direction of change in the quantity supplied, and it doesn't highlight the magnitude of change.

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Which of the following demonstrates the law of supply?

Presented below are a few practical examples of how the law of supply works.

Example 1:

A business will produce more video game systems if the cost of those systems increases. The opposite holds true if the cost of video game systems declines. The firm might supply 1 million systems if the price is $200 each, but if the price increases to $350, they might supply 1.5 million systems.

Simply put, if consumers need more of something and are ready to pay more for it, the producers will supply more of the products. 

Example 2:

Let’s consider an example of a bakery. Imagine it supplies 200 loaves of bread every day to its consumers. The bakery staff work in the morning and supply them to customers as soon as the shop opens. Hence, the supply of bread is 200 loaves.

If you check the supply, it reacts to the pricing and demand. When the demand increases, two things can happen. The bakery hikes its prices, or it attempts to make more loaves of bread by increasing supply.

The bakery isn’t going to supply more loaves of bread if there are no consumers to buy them. That is inefficient and wasteful. This means they would have to throw good loaves away every day.

They will only begin supplying more loaves of bread if they notice they’re selling out before the day end. If more customers demand bread, this is a clear signal that they need to increase the supply.

The bakery may hike prices to make extra profits, which would lower the demand, as many customers would no longer be interested in paying a higher price.

Alternatively, it could recruit more employees to maximise the supply of bread. Or, in some cases, the shop may increase prices and use the extra profits to invest in a new bread maker machine. This allows an increase in the productivity of the existing staff. They could then prepare more loaves of bread at the same time.

Some other examples of the laws of supply include-

• Fruit vendors will try to supply more fruits for sale when the fruit prices are high and relatively less when the prices are low
• Banks will provide more loans if interest rates go up
• Countries producing oil will supply more of it if the price per barrel rise and restrict the supply if the price per barrel drops.

Parting thoughts,

Preparing an assignment will be easier once you understand the concept clearly. This post simplifies the concept so that you tackle even the most complex assignments on this topic.