SUPPLY AND ITS DETERMINANT'S

IN BASIC WORD’S WE CAN DESCRIBE SUPPLY AS THE AVAILABILITY OF GOODS FOR SALE AT ANY GIVEN  PRICE .WHEN ASSESSMENT OF NEEDS  A OF CUSTOMER’S ARE CONCERNED, WE SEE THE DEMAND CONCEPT, BUT WHEN WE THINK FROM THE POINT OF VIEW OF A SELLER , SUPPLY IS MORE IMPORTANT.

WHAT ARE THE DETERMINANTS OF SUPPLY?

THE DETERMINANTS OF SUPPLY ARE :-

·         PRICE

     PRICE PLAYS ONE OF THE MOST IMPORTANT ROLES IN DETERMINING SUPPL FOR A PRODUCT OR SERVICE.IF A PERSON CAN PURCHASE SIMILAR PRODUCTS AT TWO DIFFERENT PRICES HE WILL ALWAYS GO FOR THE ONE WITH THE LOWER PRICED ALTERNATIVE,THIS SHOWS THAT COMPANIES NOT ONLY NEED TO MAKE THEIR PRODUCTS OF HIGHER QUALITY BUT ALSO BE COMPETITIVE AT PRICING.

NON-PRICE DETERMINANT’S

·         COST OF PRODUCTION

THE OVER ALL PRODUCTION COST PLAYS A GREAT ROLE IN SUPPLY DETERMINATION, AS THE PRODUCTION COST IS THE ELEMENT THAT HELPES US TO BE MORE COMPETITIVE BY LOWERING THE OVER COST’S.

·         PROFITABILITY OF ALTERNATE  PRODUCTS

 ALTERNATE PRODUCTS ARE DIRECT SUBSTITUTE’S TO OUR PRODUCTS , AND THEIR PROFITABILITY IS DIRECTLY LINKED WITH OUR DETIORATION.

·         SEASONALITY

 DO YOU WEAR WOOLEN CLOTHE’S IN THE SUMMER?, DO YOU CARRY AN UMBRELLA WITH OUT ANY RAIN ?, DO YOU GET MANGOES IN WINTER? , NO ISN’T IT. THIS IS BECAUSE LIKE PREFERENCES , THE GOODS PRODUCED IN ORDER TO SUPPLY ALSO CHANGES ACCORDING TO CUSTOMER NEEDS AND WANTS.

·         GOVERNMENT TAXES

IF THE GOVERNMENT KEEPS ON INCREASING TAXES.DO YOU THINK THAT THE SUPPLIER’S WILL STILL BE ABLE TO PRODUCE THE GOODS AT MINIMUM PRICES ? .THIS IS THE REASON WHY GOVERNMENT PLAY’S A GREAT ROLE IN BUDGET FORMULATION AND IN SALE.

·         NUMBER OF SELLER’S

 THE MARKET SHARE A COMPANY HAS DEPEND’S ON THE NUMBER OF OTHER SELLER’S IN THE MARKET.DEPENDING ON THIS THE SUPPLY MARKET CAN BE TERMED AS EITHER MONOPOLY, OLYGOPOLISTIC ,PERFECT COMPETITION MARKET ETC.

·        TECHNOLOGY

  ADVANCEMENT AND IMPROVEMENTS ON TECHNOLOGY FACILITATE GROWTH IN PRODUCTION AND INCREASE PROFITS.

The Supply Elasticity

Elasticity of Supply

Definition of Elasticity:

Ever think of finding out the comparison level of two variable? Well, Elasticity is the best option. Elasticity refers to the measure of the sensitivity of one variable if the other changes. For example, Advertising elasticity is the relationship between the ad budget and the changes in sales volume.

Economists are often  interested in elasticity of demand and elasticity of supply.

The scenario of elasticity can be of three types mainly
1. When elasticity is greater than 1 i.e elastic situation
2. When elasticity is less than one i.e inelastic situation
3. When elasticity is equal to one i.e unitary elastic situation

Elasticity has various determinants which are as below

Elasticity is one of the prime factor to consider in managerial as well as business decision making.
It helps in deciding proper price, channeling the supply and handling the demand to make business successful.

Elasticity of Supply

The elasticity of supply is a measure of a company’s ability to increase or decrease production in response to a price change. It is also referred to as the price elasticity of supply.

Why it matters

Elasticity of supply tells us how fast supply responds to quantity demand and price increase. When there is a popular product that is in short supply for instance, the price may rise as a result. The manufacturers of that product will increase output (the supply) to keep up with the demand. The higher the elasticity of supply, the faster the supply will increase when demand and price increase. Some goods/services are more supply inelastic however, whenever there is a supply shortage. Limited tickets to a concert may have a very inelastic supply. The price of the concert tickets can be raised to any amount, but because there is a fixed number of seats and tickets, the supply (of tickets sold) may not be increased by much if at all.

Supply Determinants

• Flexibility of inputs

When you go to hotel, the most important person is chef. If chef is absent nothing will go, chef cant be replaced.

• Mobility of inputs

Theater group, they will be performing in different countries, different events. But the machineries are not easy to relocate.

• Durability

• Time

Drivers are elastic inputs but if you have a urgent meeting and that driver become unavailable for that time period that moment he cant be replaced.

• Ability to produce substitutes inputs

If anything can be substituted then inelastic goods is turned into elastic.

Postulate of Demand & Supply

When supply and demand are in balance, the global economy is said to be equal between price and quantity.

Demand - If you demand Something then you,
1. need it
2. afford it
3. and have a focused plan to purchase it .

The quantity demand for a goods and services is the cost that customers plan to purchase during a given time period with the given cost.

Supply - If a company distributes a goods or services then the firm has
1. The technology and the resource to manufacture it
2. should generate profit from it
3. capable of making a definite plan
to produce and sell it .

The quantity supplied for a product is the cost manufactures plan to sell during a particular time period at a given price.

Market equilisation - It is a situation in which competitors force balances on each other. It occurs when the price is equal for all buyers and sellers.

What is equilisation quantity..?
- It is the quantity bought and sold at a equal price.
▪Price regulates buying and selling plans.
▪ Cost adjust when plans dont match.

Cost Benefit Analysis

Concept of Cost Benefit Analysis:

• Cost benefit is a tool which modern financial analysts adopt before undertaking any financial operations or commercial activity.
• The ultimate aim of a business organization is to make profits.
• Therefore, any system in the organization must produce more benefits as compared to its costs for the organization to survive and prosper.

What is Cost Benefit Analysis?

•  A cost benefit analysis is done to determine how well a planned action will turn out.
• The analysis relies on the addition of positive factors and the subtraction of negative ones to determine a net result.
• Cost Benefit Analysis has been established primarily as a tool for use by governments in making their social and economic decisions.
• Cost Benefit Analysis measures costs and benefits to the community of adopting a particular course of action.

COST	BENEFIT
Any negative effect on an organization resulting from the implementation of the project. Examples: Maintenance costs Environment Research and development Labour Costs	A benefit is any positive effect on the organization resulting from the implementation of the project. Examples: Increase in productivity. Reduction in Costs. Saving Time.

The General Steps of Cost Benefit Analysis are:

1.        Specifying the project clearly
2.        Describe quantitatively the inputs and outputs of the program
3.        Estimate the Social cost and benefits of these inputs and outputs of the program
4.        Compare these benefits and costs