Law of Supply Meaning of Supply: By supply, we mean the quantity of the commodity which is offered for sale at a particular price. Supply is always related to price without the reference of price supply cannot be determined.
Definition of Supply
“Other things remaining the same as the price of any commodity rises its supply also rises and as the price of any commodity falls its supply also fall.”
There is a direct relationship between the supply of any item and its fixed price.
According to this law, the producers supply more goods at higher prices and less supply at lower prices.
Now we can explain this law by the following schedule and diagram
The supply schedule of sugar which is supplies in the market at different prices per unit of time is given below:-
Price P/kg Quantity Supply kg
In the above diagram, the manufacturer is able to offer 500 kg of the item for sale at a price of Rs. 10 and as the price goes down, the quantity offered is reduced by Rs. Is left supply Diagram
In the above diagram, the quantity is measured with “OX” and with “OY”, “SS” “which indicates that the quantity sold at a higher price and the quantity at a lower price. Is offered.
Law of Supply Meaning of Supply Definition of Supply
We have stated that the law of supply will apply when other things remaining the same these other things are called assumptions, which is as under:-
- a) Techniques of Production do not change Due to the improvement in the production techniques, the cost of production decreases, and supply increases even prices are low.
- b) Climatic Situation does not change The supply of the agricultural product is directly affected by the weather, so it does not change.
- c) No Improvement in the means of Transport The supply of commodity may in-crease due to improvement in the means of transport and communication.
- d) Political Changes Due to political disturbances supply may increase or decrease in a country. Political unrest discourages the supply.
- e) Taxation Policy does not change If the government imposes heavy taxes then the supply of goods can be an increase or decrease at each price.
- f) Future Expectations If the firms expect higher profits in the future they will take the risk to produce goods on large scale.
- g) No change in the cost of Production If the prices of various factors of production fall down, it will result in increasing the supply on varying prices.
- h) Perishable Goods Hoarding of destroyable goods is very difficult so there is no effect of price on the supply.