SUPPLY

Meaning :

It refers to the schedule showing the various

quantities of a commodity which a producer or a
firm is ready to sell at different possible prices
of that commodity.
Quantity supplied:

It refers to a specific quantity which a

producer is ready to sell at a specific price
of the commodity.

Stock :

It refers to total quantity of that commodity

which is available with the producer at a
point of time.
Supply schedule

It is a table showing various quantities of a

commodity offered for sale at different possible
prices of that commodity.

(i) Individual Supply Schedule

(ii) Market Supply Schedule

Individual supply schedule

It refers to supply schedule of an individual

producer or a firm in the market.

C QS(x)
1 10
2 20
3 30
4 40
5 50

The diagrammatic presentation of supply

schedule is known as supply curve.
Market supply schedule

It refers to supply schedule of all the firms or

producers in the market producing a particular
commodity.

Price QS(x) QS(Y) M.S.

(X + Y)

1 10 20 30
2 20 30 50
3 30 40 70
4 40 50 90
5 50 60 110

The diagrammatic presentation of supply

schedule is known as supply curve.
 Movements along a Supply curve
OR

Change in Quantity Supplied

It refers to extension or contraction of supply.

These are caused with changes in own price of
the commodity.

(a) Extension of Supply

(b) Contraction of Supply

(a) Extension of Supply

It occurs when quantity Supply rises in response to

a rise in own price of the commodity.
Price QS(x)
1 1
5 5
(b) Contraction of Supply

It occurs when quantity supply falls in response to a

fall in own price of the commodity.

Price QS(x)
5 5
1 1
 Shifts in supply curve
OR
Change in supply
It occurs due to change in other factors, other than
own price of the commodity. In this, there is a

(a) Increase in supply

(b) Decrease in supply

 (a) Increase in supply

It refers to a situation when quantity supplied of a

commodity increases, even when own price of the
commodity is constant. Supply curve shifts forward.

Price QS(x)
10 20
10 30
 (b) Decrease in Supply

It refers to a situation when quantity supplied of a

commodity decreases, even when own price of the
commodity is constant. Supply curve shifts
backward.

Price QS(x)
10 30
10 20
Supply Functions
Or
Determinants of
Supply
(I) Own price of a commodity :

There is a direct relationship between own price

of a good and its quantity supplied. Higher the
price, higher the quantity supplied and lower the
price, lower the quantity supplied.

(ii) Price of related goods :

Supply of a good depends upon the price of

other goods.
(iii) Number of firms in the industry:

Market supply of a good depends upon number

of firms in the industry. Increase in the number
of firms means increase in market supply and
decrease in number of firms means decrease in
market supply of a commodity.

(iv) Goal of the firm :

If goal of the form is to maximize profits more

quantity of the commodity will be offered only at
a higher price, while if goal is to maximize sale
more will be supplied even at the same price.
(v) Price of Factors of Production :

If price of factor of production decreases, cost

of production also reduces. Accordingly, more
of the commodity is supplied at its existing
price. Conversely, if the factor price increases,
cost of production also increase. In such a
situation less of commodity is supplied at the
existing price.

(vi)State of Technology :

Improvement in the technique of production

reduces cost of production. Consequently, more
of the good is supplied at its existing price.
(vii) Business expectations :

In situations of bullish expectations, investment

tends to rise and supply starts rising and just
opposite happens in situations of bearish
expectations.

( VIII) Government policy :

Increase in taxation may decrease supply while

increase in subsidies may increase it.
LAW OF SUPPLY
The law of supply states that, other things
remain constant, quantity supplied rises with
the rise in price and falls with the fall in price.

C QS(x)
1 10
2 20
3 30
4 40
5 50
Assumptions are:

(i) There is no change in the price of other

goods
(ii) There is no change in the technique of
production.
(iii) There is no change in the goal of the firm
(iv) There is no change in the price of factors
of production.

Exceptions are:

(i) Agricultural Output

(ii) Distinction goods
(iii) Perishable goods