Exceptional supply curves, Managerial Economics

Exceptional supply curves

In have some situations the slope of the supply curve may be reversed.  

i)   Regressive Supply.  In this case, the higher the price within a certain range, the smaller the amount offered to the market.  This may occur for example in some labour markets where above certain level, higher wages have a disincentive effect as the leisure preference becomes high.  This may also occur in undeveloped peasant economies where producers have a static view of the income they receive.  Lastly regressive supply curves may occur with target workers.

ii)    Fixed Supply.  Where the commodity is rare e.g. the "Mona Lisa", the supply remains the same regardless of price.  This will be true in the short term of the supply of all things, particularly raw materials and agricultural products, since time must elapse before it is physically possible to increase output.

Posted Date: 11/27/2012 5:58:29 AM | Location : United States







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