Supply

Various amount of a good or service producers are willing to put on the market at various prices in a given period of time

1.    change in the price of a factor of production(or special factor)

2.    change in the state of technology

3.    govn intervention

a.     imposition of a tax(ad valorem%, specific)

b.    pays subsidy

c.     Imposition of a max/min price

     flat price - any artificially imposed price-Creates black market(Russia)

     price floor - minimum price

1.     Agricultural prices (CAP)

2.     Minimum wages (creates unemployment)

3.     Exchange rates

     Price stabilisation

     ceiling price-max price imposed

1.     Wartime controls(coupons)

2.     Rent control(abolished in 1988)

3.     Interest(low interest rates will create a shortage of supply)

d.    Implementation of a buffer stock system(max&min)

e.    imposition of a quota.

4.    new firms entering the industry

5.     the price of other commodities

6.     tastes of producers

7.     exogenous factors (weather).

Elasticity det.

1.     Time

2.     factor mobility

3.     natural constraints

4.     risk taking(more willingness>more elastic). High marginal tax reduces

Periods (Marshall)

i.     Momentary - absolutely inelastic.

ii.    Short run - with the limit of present fixed costs

iii.    Long run - depends on factors:

       1.         Time

       2.         Factor mobility

       3.         Natural constraints

       4.         Risk taking

Cobweb theorem 1.            Producers learn from experience2.         Distributed time lags 3.  Unplanned variations of supply will modify further (agriculture) 4.            Prices change too slowly