UNIT –II

Demand and Supply Analysis

Demand Analysis:
Every want supported by the willingness and ability to buy constitutes demand for a particular product
or service
A product or service is said to have demand when three conditions are satisfied
 Desire on the part of the buyer to buy
 Willingness to pay for it
 Ability to pay the specified price for it

Nature of Demand (Types of Demand)

1. Consumer Goods Vs Producer goods:

Goods can be grouped under consumer goods and producer goods. Consumer goods are those
which are available for consumption. Ex Bread, apples, rice and so on. Producer goods are those
which are used for further processing or production to earn income Ex Machinery, Tractor,
Furniture
2. Autonomous Demand Vs Derived Demand :
Autonomous demand refers to the demand for products and services directly. The demand for
the services of a super specialty hospital can be considered as autonomous where as the
demand for the hotels around that hotel is called derived demand
3. Durable Vs Perishable Goods:
Durable goods are those which give service relatively for a long period Ex TV, Refrigerator etc.
The life of perishable goods is very less may be in hours or days Ex Milk, Vegetable etc
4. Firm demand Vs Industry demand: The firm is a single business unit where as industry refers to
the group of firms carrying on similar activity. One construction company may use 100 tonnes of
cement during a given month. This is firm demand. The construction industry in a particular
state may be considered as industry demand
5. Short Run demand Vs Long Run demand:
Short run refers to a period of short duration and long run refers to the relatively period of
longer duration. In short run, the firm can adjust their production by changing factors of
production like materials and labor
6. New demand Vs Replacement Demand:
New demand refers to the demand for the new products and it is the addition to the existing
stock. In replacement demand, the item is purchased to maintain the asset in good condition.
The demand for cars is new demand; the demand for spare parts is replacement demand
7. Total Market and Segment Market Demand:
Let us consider, the total demand for sugar in the region is the total market demand. The
demand for sugar from the sweet making industry from this region is the segment market
demand

Factors Determining Demand:

 The demand for a particular product depends on several factors. They are
a) Price of the product (P)
b) Income level of the consumer (I)
c) Tastes and preferences of the consumer (T)
d) Prices of related goods which may be substituted/ complementary (P E)
e) Expectations about the prices in future (E P)
f) Expectations about the income in future (E I)
g) Size of the population (SP)
h) Distribution of consumers over different regions (D C)
i) Advertising effects (A)
j) Any other factors capable of affecting the demand (O)

Demand Function:
Demand function is a function which describes a relationship between one variable and its determinants

Mathematically, the demand function for a product A can be expressed as follows

Q d = f( P,I,T, PE, EP, EI ,SP ,DC ,A,O )

Law of Demand:
The Law of demand states that “ Other things remaining the same, the amount of quantity demanded
rises with every fall in the price and vice versa

There are certain exceptions in the demand law, they are

1. Where there is a shortage of necessities feared :

If the customers fear that there could be shortage of necessities, then this law does not hold
good. They may tend to buy more than what they require even if the price of the product
increases.
2. Where the product is such that it confers distinction :
 Products such as jewels, diamonds confer distinction; the customer tends to buy to maintain the
prestige even though there is increase in its price. Such products are called Veblen goods
3. Giffens Paradox: People of low income purchase more of a commodity such as broken rice,
bread, wheat etc when its price rises. When the price falls, instead of buying more, they buy less
of this product and use the savings for the purchase of better goods such as meat. This
phenomenon is called Giffens Paradox and such goods are called inferior goods or giffen goods
4. In case of ignorance of price changes:
At times, the customer may not keep track of changes in price. In case of these expectations, the
demand curve slope upwards

Change in Demand:
The increase or decrease in demand due to change in the factors is called change in demand. It
leads to a shift in the demand curve to right or to the left
 Increase in demand
 Decrease in demand
 Extension and contraction in demand

Elasticity of Demand :
It is defined as the rate of responsiveness in the demand of a commodity for a given
change in price

Measurement of Elasticity :
The elasticity is measured in the following ways

a) Perfectly Elastic demand

b) Perfectly Inelastic demand
c) Relatively elastic demand
d) Relatively inelastic demand
 e) Unity Elasticity

a) Perfectly Elastic demand:

When any quantity can be sold at a given price, then the demand is said to be perfectly elastic
Figure reveals that the quantity demanded increases from OQ 1to OQ2 ,there is no change in price

b) Perfectly Inelastic demand:

When there is a certain change in price leads to no change in quantity demanded then the
elasticity is said to be Perfectly Inelastic demand
c) Relatively elastic demand :
The demand is said to be relatively elastic when the change in demand is more than the change
in price. Figure below reveals that the quantity demanded increases from OQ to OQ 1 due to
decrease in price from OP to OP1

The extent of increase in the quantity demanded is greater than the extent of fall in price.

d) Relatively inelastic demand:

The demand is said to be relatively inelastic when the change in demand is less than the change
in price

e) Unity Elasticity :
The elasticity in demand is said to be unity when the change in demand is equal to the change in
price .The quantity demanded is equal to the extent of fall in the price i.e. OP to OP 1 is equal to
OQ to OQ1
(a) Price Elasticity of Demand:

Price elasticity of demand refers to the quantity demanded of a commodity in response to a given
change in price of the product

Price elasticity is normally negative

Price elasticity of demand = Proportionate change in quantity demanded

Proportionate change in price of product X

Edi = = ( Q2-Q1)/ Q1
(P2-P1)/P1
Q1 is the quantity demanded before change
Q2 is the quantity demanded after change
I1 is the price before change
I2 is the price after change

Numerical Problems :

1. Determine the price elasticity of demand given that the quantity demanded for the product
is 1000 units at a price of Rs 100. The price decline to Rs 90 and the quantity demanded is Rs
1500
Let us define the variables here
Q 1= 1000 units, P1 =100 rs
Q2 = 1500 units, P2 = 90 rs
Edp =( Q2-Q1)/ Q1 = (1500-1000)/1000 = -5
(P2-P1)/P1 (90-100)/100
Since Edp = -5, it means that for every 10 % change in the price, there is 50% change in demand.

Here numerical value of elasticity is more than 1 , the demand is said to be elastic (e> 1)

2. Determine the price elasticity of demand given that the quantity demanded for a product is 1000
units at a price of Rs 100, the price decline to Rs 70 and the quantity demanded increases to 1100
units

Q1 = 1000 units, P1= Rs 100

Q2 = 1100 units, P2 = Rs 70

Edp =( Q2-Q1)/ Q1 = (1100-1000)/1000 = -0.33

(P2-P1)/P1 (70-100)/100

Since Edp = -0.33, for every 10 % fall in price, there is 3.3% increase in demand

Numerical value of elasticity < 1, the demand is Inelastic. The percentage change in quantity demanded
is less than the percentage change in the price

3. Determine the price elasticity of demand given that the quantity demanded for a product is 1000
units at a price of Rs 100, the price decline to Rs 50 and the quantity demanded increases to 1500
units

Q1 = 1000 units, P1= Rs 100

Q2 = 1500 units, P2 = Rs 50

Edp = ( Q2-Q1)/ Q1 = (1500-1000)/1000 = - 1.0

(P2-P1)/P1 (50-100)/100

Since Edp = -1, it means for every 10% change in the price, there is 10 % change in the quantity
demanded,

Since the numerical value is equal to 1, the demand is said to be unity elasticity. In other words, the
percentage of increases in quantity demanded is equal to the percentage of decrease in price.

(b) Income Elasticity of Demand :

Income elasticity of demand refers to the quantity demanded of a commodity in response to a given
change in income of the consumer

Income elasticity is normally positive

Income elasticity of demand = Proportionate change in quantity demanded

Proportionate change in income

Edi = = ( Q2-Q1)/ Q1
(I2-I1)/I1
Q1 is the quantity demanded before change
Q2 is the quantity demanded after change
I1 is the income before change
I2 is the income after change
5. Determine the income elasticity of demand given that the quantity demanded for product is
1000 units at daily income Rs 100. The income decline to Rs 80 and the quantity demanded to
700 units

Let us define the variables here

Q 1= 1000 units, I1 =100 rs
Q2 = 700 units, I2 = 80 rs
Edp =( Q2-Q1)/ Q1 = (700-1000)/1000 = 1.5
(I2-I1)/I1 (80-100)/100

Edi = 1.5, for every 10 5 fall in income, there is 15 % decrease in demand. Since the numerical value of
elasticity is more than one, the demand is relatively elastic.

In other words, the % change in quantity demanded is more than the % change in income

(c ) Cross Elasticity of Demand :

Cross elasticity of demand refers to the quantity demanded of a product in response to a change in the
price of a related good which may be substitute or complement

Cross Elasticity of demand = Proportionate change in quantity demanded of Product X

Proportionate change in quantity demanded of Product Y

Edc= = ( Q2-Q1)/ Q1
(P2Y-P1Y)/P1Y

Problem : Determine the cross elasticity of demand ,given that the quantity demanded for Samsung
mobiles is 1000 units, if the price of One plus mobile is Rs 5000. The quantity demanded for Samsung
mobiles is 1200 units if the price of One plus mobile is Rs 7000

Q1 = 1000 units, P1Y= Rs 5000

Q2 = 1200 units, P2Y = Rs 7000

Edc = ( Q2-Q1)/ Q1
(P2Y-P1Y)/P1Y

= (1200-1000)/1000

(7000-5000)/5000

= 0.5

Since Edc = 0.5. it means that for 10 % increase in price of One plus mobile, there is 5% increase in the
quantity demanded of Samsung mobiles

Since the numerical value is less than one (e<1), it is relatively inelastic

(d ) Advertising Elasticity:

It refers to increase in sales revenue because of change in the advertising expenditure

Advertising Elasticity = Proportionate change in quantity demanded for product X/ Proportionate change
in Advertising costs

Eda = = ( Q2-Q1)/ Q1

(A2-A1)/A1

Prob: Determine the advertising elasticity of demand given that the quantity demanded for product
M is 1,00,000 units per day at a monthly advertising budget of Rs 10,000, the monthly advertising
budget is slashed to Rs 5000, the quantity demanded will fall down to 30,000 units per day

Let us define the variables here

Q 1= 100000 units, A1 =Rs 10000
Q2 = 30000 units, P2 = RS 5000
Edp =( Q2-Q1)/ Q1 = (30000-100000)/100000 = 1.4
(A2-A1)/A1 (5000-10000)/10000

Since Eda = 1.4, it means that foe a 10 % change in the advertising budget, there is 14% change in
demand.

Here numerical value of elasticity is more than 1 , the demand is said to be elastic (e> 1)

Factors Governing Elasticity of Demand

Elasticity is governed by a number of factors

a) Nature of product: Based on their nature, the products and services are classified into
necessities, comforts and luxuries. The meaning and definition of these necessaries, luxuries and
comforts change from person to person, time to time and place to place

b) Time frame: The more the time available for the customer, the demand for a particular product
may be elastic and vice versa Ex: Vegetables

c) Degree of postponement: Where the product consumption can be postponed, the product is
said to have elastic demand and where it cannot be postponed it is said to be inelastic demand.
The consumption of necessaries cannot be postponed and hence they have inelastic demand

d) Number of alternative uses: If the number of alternative uses is more, the demand is said to be
highly inelastic. Take the case of power or electricity; it is used for a number of alternatives uses
as in industries, offices, trains, households and so on

e) Tastes and preferences of the consumer: When the customer is particular about his taste and
preferences, the product is said to be inelastic. For the customer who is particular to certain
brands such as Colgate, Tata Tea, and Annapurna Atta and so on, price increases, do not matter

f) Availability of close substitutes: When there are a good number of close substitutes, the
demand is said to be elastic. If Pepsi and coke are equally good for me, if there is increase in
price of Pepsi, I may tend to switch to coke

g) In case of complementary or joint goods: In case of complimentary or joint goods having joint
demand, the elasticity is comparatively low

h) Level of prices: If the price is very expensive ( such as diamonds) or very cheap (salt) then the
product is likely to have an inelastic demand. The demand of the relatively poor people is more
sensitive to price changes. The rich may not bother about the price changes

i) Availability of subsidies Subsidy refers to money paid by a government in order to help

financially make something cheaper. Ex LPG, sugar, wheat and so on

j) Expectations of prices: Where people expect a fall in the price, the demand for the product is
likely to be inelastic
 k) Durability of the product: When the product is durable in case of consumer durables such as TV,
the demand is elastic. In the case of perishable goods such as milk, the demand is inelastic

l) Government policy: Where the government policy is liberal, the product is likely to have elastic
demand and vice versa. Government can raise tax collections with a little reduction in the tax
rates

Significance of Elasticity of Demand

 To fix the prices of factors of production

 To fix the price of goods and services provided
 To formulate / revise the government policies
 To forecast demand
 To plan the level of output and price

Point Elasticity & Arc Elasticity

A demand curve does not have the same elasticity throughout the entire length. The given figure sows
the changing elasticity at different points of a demand curve
From above, it can be seen that elasticity at point S, where the demand curve meets the quantity axis is
equal to zero, and elasticity at point s, where the demand curve meets the price axis, is equal to infinity.
If P1 is the midpoint of sS, the elasticity at P 1 is equal to 1

At all points between P1 and S, the elasticity is greater than zero but less than unity, at all points
between P1 and D, the elasticity is greater than unity but less than infinity. At point s , elasticity is equal
to infinity

0≥e≤∞

The elasticity at a single point on the demand curve is called point elasticity

∆Q
Q
Point Ep =
∆P
P
With the help of differential calculus

Edp = dQ/dP*.P/Q

dP/dQ is first order derivative of demand equation and P/Q is the ratio of price to quantity

Figure below shows point elasticity for linear demand curve

Elasticity at point R is the ratio of lower segment RD1 to the upper segment RD = RD1/RD

At point S , the elasticity is equal to = SD1/SD

Arc Elasticity:
Arc elasticity measures the average responsiveness to price change over a finite stretch on the demand
curve. From the above figure, where AB refers to the stretch on the demand curve DD, it is not clear
whether point A or point B should be considered to determine elasticity.

If we move from A to B , we get

Ep = ∆ Q/∆ P . P/Q = (100/3)(6/100) = 0.5

If we move from B to A, we get

Ep=
∆ Q P 100
. =
∆P Q 3 ( )
(
3
100
) = o.2

Average = 0.5+0.2/2=0.35

Which means it is the price demand that is inelastic

 ( P 1+ P 2 )
/(Q 1+Q2) ∆ Q ( P 1+ P 2)
Arc Ep = ∆ Q 2 . /(Q1+Q 2)
. =¿ ∆ P 1
∆P 2

Factors Governing Demand Forecasting :

Functional nature of demand

Types of forecasts

Forecasting level
Degree of orientation

Established or New products

Nature of goods

Degree of competition

Methods of Demand Forecasting

There are many methods of forecasting demand. To forecast demand, we need to build a certain base of
information

I. Survey II.Statistical III.Other methods

method methods
a) Survey of Buyers a) Expert opinion method
intention a) Trend projection b)Test marketing
i)Census method method c)Controlled experiments
ii)Sample I) Trend line d)Judgmental approach
method by
ii)Survey of sales observation
force II) Least square
b) Survey of sales method
force III) Time series
analysis
IV) Moving
average
method
V) Exponential
smoothing
b) Barometric
techniques
c) Simultaneous
equation method
d) Correlation and
regression method

1. Survey Method :
a) Survey of Buyers Intentions:
The survey of buyers can be conducted either by covering the whole population or by
selecting a sample group. If the company wishes to find the opinion of all the buyers,
the method is called census method or total enumeration method. On the other hand,
the firm can select a group, this method is called sample method.
  This method is advantageous when the product is new on the market for which
no data previously exists. When the consumers are stick to their opinions
 The method has certain disadvantages.
Surveys may be expensive. Sample size and timing of survey. Inconsistent
buying behavior
b) Sales Force Opinions:
Another source of getting reliable information about the demand forecasting. The sales
people are those who are in constant touch with the main and large buyers of a
particular market. The data collected forms another valid source of reliable information
This method is appropriate when sales persons are likely to be most knowledge able
sources of information

2. Statistical Methods:
a) Trend Projection method:

These are generally based on analysis of past sales patterns. There are five main techniques in this
method

m) Trend Line by observation:

This method of forecasting trend is easy and quick as it involves merely the plotting the actual
sales data on a chart and then estimating just by observation where the trend line lies

ii) Least Squares Method:

Certain statistical formulae are used here to find the trend line which best fits the available data. The
trend line is the basis to extrapolate the line for future demand. The estimating linear trend equation of
sales

S = x + y(T)

Where x & y have been calculated from past data S is sales and T is the year number for which the data
is made

To find the values of X & y, the following normal equations have to be solved

∑ S=Nx +∑ T

∑ST = x∑T + y∑T 2

N= No of years data

Problem:

Year 1996 1998 2000 2002 2004

Sales(Lakhs) 75 84 92 98 88
Estimate the sales for the year 2006 and 2008

Estimate the sales for the year mentioned

∑ S=Nx +∑ T

∑ST = x∑T + y∑T 2

Let us now determine the following ∑ S , ∑ST,∑ T ∧¿ ∑T2

year Year No (T) Sales(S) ST T2

1996 1 75 75 1
1998 3 84 252 9
2000 5 92 460 25
2002 7 98 686 49
2004 9 88 792 81
∑ T =25 ∑ S=437 ∑ST=2265 ∑T2= 165

By substituting the above values in the normal equations, we get

437=5x+25y

2265=25x+165y

By solving these equations, we get x=77.4, y= 2

By substituting these values in the trend equation x+y(T)

S2006 =77.4+2(1)= 99.4 lakh units

S2008 = 77.4 +2(13) = 103.4 lakh units

iii) Time Series Analysis:

One major requirement for this technique is that the product should have actively been traded in the
market for quite some time. Given significantly large data, the cause and effect relationship can be
discovered through quantitative analysis.

The following are the four components

Trend (T) is also called long term trend ,is the result of basis developments in the population, capital
formation and technology. These developments relate to over a period of long time say 5 to 10 years

Cyclic Trend(C) is seen in the wave like movement of sales. These could be related to the business cycles
in the economy such as inflation or recession

Seasonal Trend(S) refers to a consistent pattern of sales movements within the year. More goods are
sold during the festival seasons
Erratic Trend (E): results from the sporadic occurrence of strikes, riots and so on. These erratic
components can even damage the impact of more systematic components Classical time series analysis
involves procedure for decomposing the original sales series (Y) into components T,C,S,E while one
model states that these components interact linearly Y= T+C+S+E

Another model states that Y is the product of all these components Y=TxCxSxE

It is simple and inexpensive. It is significantly consider large data

iv) Moving Average Method:

This method considers that the average of past events determines the future events. This method is
easy to compute. One major advantage with this method

Is that the old data can be dispensed with, once the averages are computed

The following examples illustrates the concept of moving average method

Ex : Compute 3 day moving average from the following daily sales data

Date & Month Daily Sales(lakhs) 3-day moving average

1 40
2 44
3 48
4 45 44
5 53 45.7

To calculate 3 day moving average

S4 = 40+44+48/3 = 44

S5 = 44+48+45/3 = 45.7

(v)Exponential Smoothing:

This is a more popular technique used for short run forecasts .This method proves more realistic when
the data is consistent all through the year, unaffected by wide seasonal fluctuations.

St+1 = CSt +(1-c)Smt

Where St+1 =exponentially smoothed avg for New Year

St= actual data in the more recent past

Smt = most recent smoothed forecast

c= smoothing constant
‘c ‘ varies between 0 & 1

Time period Actual sales(St) Predicted sales

1 5.0
2 5.6
3 6.7
4 5.8
5 6.9 5.775
6 5.1 5.887
7 8.1 5.808

Let us take four period average as the initial forecast year 5 while smoothing constant (c=0.1)

S5=(S1+S2+S3+S4)/4

= ( 5.0+5.6+6.7+5.8)/4

= 5.775

Sales for S5 = 6.9. S6 is calculated as

S6 = cS5+ (1-c) Smt

(0.1)(6.9)+(1-0.1)(5.775)

=5.887

Similarly predicted sales for year 7 can be

S7=cSt+(1-c)Smt

=0.1(5.1)+(1-0.1)5.8875

=0.51+0.9(5.8875)

=5.808

b)Barometric Techniques:

Under barometric techniques, one set of data is used to predict another set. In other words, to forecast
demand for a product or service, use some relevant indicator (barometer) of future demand

To assess the demand for services in India and abroad, we see the percentage of population in each
occupation. In US, 78% of labor force is employed in services and 15% in manufacturing. In India
according to 1991 census, 21% of work force is engaged in services, 13% in manufacturing and 67% in
agriculture

c)Simultaneous Equation Method:

In this method , all variables are simultaneously considered with the conviction that every variable
influences the other in an economic environment. In other words, it is a system of ‘n’ equations with ‘n’
unknowns. It can be solved the moment the model is specified because it covers all the unknown
variables, it is also called complete systems approach to demand forecasting

d)Correlation and Regression Methods:

Correlation and regression methods are statistical techniques. Correlation describes the
degree of association between two variables such as sales and advertisement expenditure
when the two variables tend to change together, then they are correlated .The extent to
which they are correlated is measured by correlation coefficient. It ranges between +1 & -1

In regression analysis, an equation is estimated which best fits in the sets of observation of
dependant variables and independent variables

3.Other Methods:
a) Expert Opinion:
Well informed persons are called experts. Experts constitute yet another source of
information. An expert is good at forecasting and analyzing the future trends in a given
product or service at a given level of technology.
When there are different points of view among different experts, consensus can be
arrived through an objective analysis. Sorting out the differences in the estimates in this
way is called Delphi Technique
The main advantage of this method is results of this method would be more reliable as
the expert is unbiased, has no direct commercial involvement in its primary activities
b) Test Marketing:
It is likely that opinions given by buyers, salesman or other experts may be at times,
misleading. This is the reason why most of the manufacturers favor to test their product
or service in a limited market as test runs before they launch their products nationwide.
The primary objective here is to know whether the customer will accept the product in
the present form or not. Ex. Movie making
The customer psychology is more focused in this method and the product and services
are more customer acceptance
The main disadvantage of this method that it is not always easy to select a
representative audience or market
c) Controlled Experiments:
 Controlled experiments refer to such exercise where some of major determinants of
demand are manipulated to suit to the customers with different tastes and preferences,
income groups and such others. It is further assumed that all other factors remain the
same. In this method, the product is introduced with different packages in different
markets or same markets to assess which combination appeals to the customer most.
This method is used to gauge the effect of a change in some demand determinant like
price, advertisement, and packaging.
d) Judgmental Approach:
When none of the above methods are directly related to the given product or service,
the management has no alternative other than using its own judgment. This approach is
implemented when the historical data for significantly long period is not available.
Turning points in terms of policies or procedures or factors cannot be precisely
determined. Sales fluctuations are wide and significant.

SUPPLY
Supply refers to the quantity of a commodity offered for sale at a given price, in a given
price, in a given market, at given time.

Determinants of Supply:
 Price of a product
 Cost of production
 Natural conditions
 Transportation conditions
 Taxation policies
 Production techniques
 Factor prices and their availability
 Price of related goods
 Industry structure

Price of a product: An increase in the price of a product increases its supply and vice versa while the
other factors remain the same. Producers increase the supply of the product at higher prices due to the
expectation of receiving profits

Cost of Production: It is the cost incurred on the manufacturing of goods that are to be offered to
customers. Cost of production and supply are inversely proportional to each other. This implies when
the cost of manufacturing is more than their market place

Natural conditions: The supply of certain products is directly influenced by conditions for instance, the
supply of agricultural products increases when the monsoon comes well on time. Ex: Kharif & Rabi crops
Transportation conditions: Better transport facilities result in an increase in the supply of goods.
Transport is always a constraint to the supply of goods. This is because goods are not available on time
due to poor transport facilities

Taxation policies: Government tax policies also act as a regulating force in supply. If the rates of taxes
levied on goods are high, the supply will decrease and vice versa

Production techniques: The supply of goods also depends on the type of techniques used for
production. Outdated techniques results in low production which further decreases the supply of goods

Factor prices and their availability: The production of goods is dependent on the factors of production
such as raw materials, machines and equipment and labor.

Price of related goods: The prices of substitutes and complementary goods also influence the supply of a
product to a large extent. Ex: If the price of tea increases, farmers would tend to grow more tea than
coffee. Thus, the supply of coffee decreases.

Industry structures: The supply of goods is also dependent on the structure of the industry in which a
firm is operating. If there is monopoly in the industry, the manufactures may restrict the supply of goods
with an aim to raise the prices of goods and increases profits.

Supply Function:
The law of supply expresses the nature of relationship between quantity supplied and price of a product.

Qs = f ( Pg,Pr,Pf,T,Tp)

Where Qs = supply

Pg = price of the goods supplied

Pr = price of other goods

Pf = price of factor input

T =Technology

Tp = time period

Supply schedule:

It can be defined as a tabular representation of the law of supply. It represents the quantities of a
product supplied by a supplier at different prices and time periods, keeping all other factors constant.

Price of Product(Rs) Demand of product A

10 10
20 20
30 30
40 40

Supply curve:

The graphical representation of supply schedule is called supply curve. Price is representated on Y- axis
and quantity demanded on X- axis

Assumptions of Law of Supply:

 Income of buyers and sellers remain unchanged

 Commodity is available in small units
 Tastes and preferences of buyers remain unchanged
 Cost of all factors of production does not change over a period of time