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The term “other things remaining the same” refers to the following
assumptions in the law of supply:
The law of supply can be explained with the help of supply schedule and
supply curve as explained below.
Supply Schedule
Further rise in price to Rs.40 and then to Rs.50 per kg results in increase in
quantity supplied by the seller to 4kg and then to 5kg. Thus, the above
schedule shows that there is positive relationship in between price and
quantity supplied of a commodity.
Supply curve
In the given figure, price and quantity supplied are measured along the Y-axis
and the X-axis respectively. By plotting various combinations of price and
quantity supplied we derived points A, B, C, D, E curve and joining these
points we find an upward sloping i.e. SS1. The positive slope of the supply
curve SS1 establishes the law of supply and shows the positive relationship in
between price and quantity supplied.
Exceptions and Limitations of the Law of Supply
Auction Sale
The law of supply states that quantity supplied increases with increase in price
and vice-versa. But this law doesn’t hold true in case of auction sale. An
auction sale takes place at that time when the seller is in financial crisis and
needs money at any cost.
If the seller expects that the price of commodity is going to fall in near future,
he will try to sell more even if the price level is very low. On the other hand, if
the seller expects further rise in price of the commodity he will not sell more
even if the price level is high. It is against the law of supply.
When a seller wants to clear its old stock in order to store new goods, he may
sell large quantity of goods at heavily discounted price. It is also against the
law of supply.
Perishable goods
Those goods which have very short life-time and they become useless after
that are all perishable goods. Those goods must be made available in the
market at its right time whatever be its price. So the seller becomes ready to
sell his goods at any offered price. It is also against the law of supply.