A close study of the supply curve shows that it slopes upwards from left to right. In other words, the supply curve is positively sloped, meaning that, there is a positive relationship between price and quantity. This indicates that as price increases quantity supplied also increases. Also, at higher price, other things being equal, it’s an incentive for producers to increase their output, since it may lead to higher profits. Lastly producers are willing to incur higher total variable cost of production when there is a price rise, because, other things being equal, they will make higher profits.
Exceptional or Abnormal Supply Curves
The normal supply curve as already noted slopes upwards from left to right. This is in relation to the law of supply. However, there are certain supply curves which do not follow this law. These curves are considered exceptions or abnormal. They include the following cases.
a. The Supply Curve for Labour
This supply curve after some point behaves like the demand curve. The supply of labour increases as wage rates increases. But at a higher wage level, labour will prefer leisure to working overtime. This can be illustrated below:
As wages increase it is observed that labour offers more hours for work if wage increase from to , more labour hours are supplied from to This may continue up to a point after which any further increase in wages will cause labour to reduce the number of hours offered. When wage increase to less labour hours are supplied at.
b. Perfectly Elastic Supply
Some commodities tend to be perfectly elastic in supply. That is at the same price any quantity of the commodity can be supplied. Manufactured goods may fall in this category. The following graph is an illustration:
c. Perfectly Inelastic Supply
There are some factors that have fixed supply no matter the change in price. Their supplies are fixed. The supply curve is vertical.
Determinants of Supply
There are various factors that determine how much is supplied of a commodity. In other words, whether a producer supplies a greater or smaller quantity of a commodity will depend upon a list of factors. These include:
1. The Price of the Commodity
Other things being equal, how much a producer supplies of a commodity depends upon the price of that commodity. This is in accordance with the law of supply which tells us that supply of a commodity will be greater at higher prices than at lower prices.
2. The Prices of Other Commodities
Once again how much is supplied of a commodity depends upon the prices of other commodities, other things being equal. This will involve commodities that use the same factors of production to produce, for example, maize and millet. Maize and millet can be cultivated on the same land. Therefore, how much is supplied of millet will depend upon the price of maize. The higher the price of maize, the smaller the quantity supplied of millet will be. This is because producers will, in an effort to get more money, switch over from the production of millet to maize production. Thus, a smaller acreage of land will be put under the cultivation of millet.
3. The Cost of Production
Cost of production here involves the prices of inputs in the production of a commodity. Inputs include labour, capital and other raw materials. Other things being equal, the higher the cost of production the smaller the quantity of commodity producers will be willing to offer for sale. Normally, producers will cut down supply if an increase in output will mean increasing cost.
4. The Level of Technology
Other things being equal, technological advancement is another factor which determines how much is supplied of a commodity. In societies where producers make use of s simple tools, total output is bound to be small, leading to a lower quantity supplied. In other societies where the level of technology or technical knowledge has advanced, more sophisticated tools and modern methods are used, thus increasing output and supply.
5. The Weather
Other things being equal, weather in particular affects so much the quantity produced and supplied of agricultural products. During periods of good weather sufficient rainfall, well distributed and sufficient sunshine more is produced of agricultural products and supply is normally high. Bad weather brings in poor harvest leading to less supply
6. The proportion of output consumed by producer himself
How much is supplied of a commodity, other things being equal, will also depend upon the proportion of total output that the producer decides to consume. When a producer consumes a greater part of his output, his supply will be small. For example, a farmer who produces 15 bags of maize and decides to consume 4 bags and sends the remaining for sale at a ruling price will have a supply of 11 bags. His supply will thus be lower than that of a farmer who produces 15 bags and consumes only 2 bags.
7. Act of Nature
Finally, how much is produced and supplied of a commodity, other things being equal, will depend upon acts of nature. These include flooding, bushfires, pest and diseases affecting agricultural products. The more these things occur, the greater the effects on agricultural output. The result will be a smaller supply.
8. Government Policy
The imposition of indirect taxes will raise the cost of production and shift the supply curve to the left, since lower quantities will be offered at the previous prices. Also government subsidies to producers reduce the cost of producing and so increase supply.
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