1. SUPPLY
&
PRODUCTION

2. Supply (Economics)
In economics, supply is the
amounts of some product
producers are willing and able
to sell at a given price all
other factors being held
constant. Usually, supply is
plotted as a supply curve
showing the relationship of
price to the amount of product
businesses are willing to sell.

3. Law of Supply:
If Price
increase, Demand will
also increase and if
price decrease, demand
will also decrease.

4. Supply Schedule
A supply schedule is a table which
shows how much one or more firms will
be willing to supply at particular
prices. The supply schedule shows the
quantity of goods that a supplier
would be willing and able to sell at
specific prices under the existing
circumstances. Some of the more
important factors affecting supply
are the goods own price, the price of
related goods, production
costs, technology and expectations of
sellers.

5. Factors affecting supply
Goods own price: The basic supply relationship is
between the price of a good and the quantity
supplied. Although there is no "Law of
Supply", generally, the relationship is positive
or direct meaning that an increase in price will
induce an increase in the quantity supplied.
Price of related goods: For purposes of supply
analysis related goods refer to goods from which
inputs are derived to be used in the production of
the primary good. For example, Spam is made from
pork shoulders and ham. Both are derived from
Pigs. Therefore pigs would be considered a related
good to Spam. In this case the relationship would
be negative or inverse. If the price of pigs goes
up the supply of Spam would decrease (supply curve
shifts up or in) because the cost of production
would have increased.

6. Conditions of production: The most significant
factor here is the state of technology. If
there is a technological advancement in one's
good's production, the supply increases.
Other variables may also affect production
conditions. For instance, for agricultural
goods, weather is crucial for it may affect
the production outputs.
Expectations: Sellers expectations concerning
future market condition can directly affect
supply. If the seller believes that
the demand for his product will sharply
increase in the foreseeable future the firm
owner may immediately increase production in
anticipation of future price increases. The
supply curve would shift out. Note that the
outward shift of the supply curve may create
the exact condition the seller anticipated,
excess demand.

7. Price of inputs: Inputs include
land, labor, energy and raw materials.
If the price of inputs increases the
supply curve will shift in as sellers
are less willing or able to sell goods
at existing prices. For example, if the
price of electricity increased a seller
may reduce his supply because of the
increased costs of production. The
seller is likely to raise the price the
seller charges for each unit of output.
Number of suppliers: The market supply
curve is the horizontal summation of the
individual supply curves. As more firms
enter the industry the market supply
curve will shift out driving down
prices.

8. Government policies and
regulations:
Government intervention can
have a significant effect on
supply. Government intervention
can take many forms including
environmental and health
regulations, hour and wage
laws, taxes, electrical and
natural gas rates and zoning
and land use regulations.

9. Supply Function and Equation
The supply function is the mathematical
expression of the relationship between supply and
those factors that affect the willingness and
ability of a supplier to offer goods for sale. For
example, Qs=f(P,|PrgS) is a supply function
where P equals price of the good Prg equals the
price of related goods and S equals the number of
producers. The vertical bar means that the
variables to the right are being held constant.
The supply equation is the explicit mathematical
expression of the functional relationship. For
example, Qs=325+P-30Prg+20s . 325 is y-intercept
it is the repository of all non-specified factors
that affect supply for the product. P is the price
of the own good. The coefficient is positive
following the general rule that price and quantity
supplied are directly related. Prg is the price of
a related good. Typically the relationship is
positive because the good is an input or a source
of inputs.

10. Supply Curve
The relationship of price and quantity
supplied can be exhibited graphically as
the supply curve. The curve is generally
positively sloped. The curve depicts the
relationship between two variables only;
price and quantity supplied. All other
factors affecting supply are held
constant. However, these factors are part
of the supply curve and are present in the
intercept or constant term.

11. Production (Economics)
In economics, production is the act of
creating output, a good or service which
has value and contributes to
the utility of individuals. The act may or
may not include factors of
production other than labor. Any effort
directed toward the realization of a
desired product or service is a
"productive" effort and the performance of
such act is production. The relation
between the amount of inputs used in
production and the resulting amount of
output is called the production function.

12. Factors of Production
In economics, factors of production are
the inputs to the production
process. Finished goods are the output.
Input determines the quantity of output
i.e. output depends upon input. Input is the
starting point and output is the end point of
production process and such input-output
relationship is called a production function.
All factors of production like
land, labor, capital and technology are
required in combination at a time to produce
a commodity. In economics, production means
creation or an addition of utility. Factors
of production (or productive 'inputs' or
'resources') are any commodities or services
used to produce goods or services.

13. 'Factors of production' may also refer specifically to
the 'primary factors', which
are stocks including land, labor (the ability to
work), and capital goods applied to production.
Materials and energy are considered secondary factors
in classical economics because they are obtained from
land, labor and capital. The primary factors
facilitate production but neither become part of the
product (as with raw materials) nor become
significantly transformed by the production process
(as with fuel used to power machinery). 'Land'
includes not only the site of production but natural
resources above or below the soil. The factor land
may, however, for simplification purposes are merged
with capital in some case (due to land being of
little importance in the service sector and
manufacturing). Recent usage has distinguished human
capital (the stock of knowledge in the labor force)
from labor. Entrepreneurship is also sometimes
considered a factor of production. Sometimes the
overall state of technology is described as a factor
of production. The number and definition of factors
varies, depending on theoretical purpose, empirical
emphasis, or school of economics.

14. Production Function
In economics, a production
function relates physical output of a
production process to physical inputs
or factors of production. The production
function is one of the key concepts
of mainstream neoclassical theories, used to
define marginal product and to
distinguish allocate efficiency, the defining
focus of economics. The primary purpose of
the production function is to address
allocate efficiency in the use of factor
inputs in production and the resulting
distribution of income to those
factors, while abstracting away from the
technological problems of achieving technical
efficiency, as an engineer or professional
manager might understand it.

15. In macroeconomics, aggregate
production functions are estimated
to create a framework in which to
distinguish how much of economic
growth to attribute to changes in
factor allocation (e.g. the
accumulation of capital) and how
much to attribute to advancing
technology. Some non-mainstream
economists, however, reject the very
concept of an aggregate production
function.