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					             Supply

Supply is the amount of a commodity
  that sellers are able and willing to
 offer for sale at different prices per
              unit of time
              Law of Supply
Introduction:
  The law of Supply shows the relationship
  between price of a commodity and its quantity
  supplied. There is a direct/positive relationship
  between the price of a good and its quantity
  offered for sale over a specific period of time.
         Law of Supply
“ Other things remaining the same,
  quantity supplied of a commodity
  increases with rise in price and
  decreases with fall in price.”
             Law of Supply
Assumptions:
This law is also based on certain assumptions
    ,which are known as assumptions of law.
1. Cost of production should remain constant
   Cost of production does not change otherwise
    the law of supply wil not hold true. If the
    cost of production goes up the supply may
    fall. Cost of production depends upon;
a) Prices of raw material should not be changed
              Assumptions
b) Transportation cost
c) Tax rate
d) Technology and methods of production
e) Wage bill
2. Seasonal variations
3. Number of produces remains the same
4. Political situation remains stable
              Supply schedule
Price of wheat (Rs/per kg)   Quantity supplied (Qs)

         5                            20

         10                           40

         15                           60

         20                           80

         25                           100
         Diagrammatic representation
                           Law of supply
Price of wheat




                 30
                 20
                                                 Price
                 10
                  0
                      0   50        100    150
                           Qs of wheat
      Changes/Shift in Supply
   Supply of a commodity is influenced by a lot
   of factors such as price of the commodity,
   cost of production, techniques of production,
   political conditions and government policies
   etc. If any factor changes supply will be
   affected. So change of supply can be
   classified into two types.
1. Extension and contraction of supply
2. Rise and fall of supply
       Extension of supply
(movement along same supply curve)

The effect of change in market price on supply
of the commodity is known as extension and
contraction of supply. So when supply changes
due to change in the price of a good then it is
called extension and contraction of supply. In
this case the supply curve will not shift from
its original position. This is called movement
along the same supply curve.
        Extension of supply
When the quantity supplied increases due to
rise in price and other factors remain constant,
this is called extension of supply. In this case
the supply curve will remain unchanged.

           Price              Qs

           2                  10

           4                  20

           6                  30
        Contraction of supply
When the quantity supplied decreases due to
fall in price and other factors remain constant,
this is called contraction of supply. In this case
the supply curve will not shift.

          Price                 Qs

           9                    30

           6                    20

           3                     10
       Rise and fall of supply

If the change in supply of a good is not due to
change in price of good but due to some other
factors, this is called rise and fall of supply. In
this case the original supply curve will shift to
the right or to the left.
             Rise in supply
When the quantity supplied increases due to
change some factors other than price, this is
called rise in supply. In this case the supply
curve will shift from its original position to the
right side.
   Price of eggs   Qs in summer Qs in winter

         2             10               20

         4             20               30

        6              30               40
                 Fall in supply
When the quantity supplied of the commodity
decreases due to change some factors other
than price, this is called fall in supply. In this
case the supply curve will shift from its
original position to the left side
  Price of ice     Qs in summer   Qs in winter

       5               4                2

       10              8                4

       15              16               8

				
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posted:2/1/2012
language:English
pages:14