~ The Meaning of Supply: of the scarce goods. It is the amount of a commodity that ¢ to offer for sale at different prices per unit of time. iethee arg . a schedule of the amount of a good that would be offered Fs of OF Sale es at any period of time; e.g, 2 day, a week, and so on” Distinction between Supply and Stock Here, it seems necessary that the meaning of the term ‘supply’ and ‘stock’ may py spade clear as they are often confused by the readers. “Supply” refers to that quanti of the commodity which is actually brought into the market for sale at a given price per unit of time. While is meant the total quantity of a commodity which exists ing market and can be offered for sale at a short notice. The supply and stock of a commodity in the market may or may not be equal. If the commodity is perishable. like vegetables, fruits, fish, etc., then the supply and the stock is generally the same. But in case of a product which is storable, the position is quite different. If the producer finds that the price of his product is low as compared to its cost of production, he tries to withhold the entire or a part of the stock. In case of a favourable price, the producer may dispose off larger quantities or the entire stock of his commodity, it will all depend upon his own valuation of the commodity at that particular time. 1. THE LAW OF SUPPLY There is a direct relati offered for sale over a spec ship between the price of a commodity and its quantity 1 s fied period of time. When the price of a goods rises. other things remaining the same, its quantity which is offered for sale increases and as price falls, the amount available for sale decreases. This relationship between prices and the auantiies a suppliers are prepared to offer for sale is called the law of supply. The of supply, in short, states that ceteris paribus sellers supply more goods at @ higher price-than they are willing at a lower pri jon i ined wi at a lower price. The supply y explained wit the help ofa schedule and acurve. se aesyp suns ne Teor ed hove, the producers are able and willin, ove, In the table al s the price falls, the qu £ to offer for say ice of Rs. 4 at price of J antity offered for sale gat’ ofa commode ones the quantity offered forsale is only ao units, “sreases, At price of Rs. one, Y ly curve. . ; at supply data of the commodity X as & Pera tiftieysupply schedule) isles Presented shown ° graphically. 7 7 In the figure (5.1) price is plotted on the a serial axis OV and the quantity supplied on the horizontal axis OX. The four points d, c, b, and a, 2 oI show each price quantity combination, ° The supply curve SS slopes upward from left to. right indicating that less quantity is offered for sale at lower prices and more at “higher prices by the sellers, The supply curve is usually Positively 60 sloped. Fig. 5.1 Quantity The supply function can also be expressed in symbols, 9(P, Fehrs EX... ) Quantity supplied of commodity x by the producers, 9 = function of nN sta 20 40 80 io 700120 Price of commodity x Technology Supplies of inputs Features of Nature = Taxes/Subsidies riables indicate that these Va! Bar on the top of last four non-price factors indicate tant. also affect the supply but they are held cons Thus 9 (P\) Ceteris paribus.88 : oe 7 ; . T SHIFT IN SUPPLY 'EMENT VS SI 2. MOVEMET pply curve: Movement along with th the law of suppl ng the 1a : vo the quantity. supplied y we have While explainiv “_oee “h the quantity supplied 7 rere wee vs remain the same. 7 decreases provided other thing: an ee in the quantity supplied of a £4 : ; to another on the same supply 2| combination ne . Such a movement at varying prices is now pea sat uch a ame Fi9.52 Moudntiy® Jjustrated with the help of a supply curve given in illustrate figu In the above figure (5.2) at price aT (Rs.3.00), aT (50 units) quantity is supplied When price rises to dL (Rs.7.0), the quantity supplied by the producers increases to OL (110 units), The changes in quan supplied at varying prices is referred as movement along the same supply curve. (b) Shifts in Supply. Shifts in supply means changes in supply. While explaining the law of supply, we have stated that other things remaining the same (ceteris paribus) the amount of a commodity off ale increases with the rise in price and decreases with a fall in price. When there isan increase in supply due to on (which were held constant) such as production t the prices .of other commodities, etc., there is a shifts to the right of origi indi sale at the same Prices per time period, resource prices, changes in supply curve s offered for ro nie eee : combination of non-price factors, less quantity is brought into Supply the supply curve st Pree the supply is said to have fallen, In case of fall in “PPly curve shifts to the left of the original Supply curve. The rise and fall y Of supply curve (shifts j i i i and a diagram, 'S 1 supply) is explained wite the help of an imaginary scheduleSupply re Theory ef: Supply schedule of shifts Original Quantity Rise i a Supplied per week. in supply faim. 200 | all in supply 20 | 40 160 . | - | 200 30 100 ~ D 20 39 70 je 1s Y —_—— > 0 50F Fall in Supply és vane! Supply Curve 7 -2S 40 Fig. 5.3 80 120 Quantity 160 200 240 In the fi gures (5.3) SS is the origi y supply curv SS is the original supply curve $°S* e ri ly e sh ; ae ) S°S* to the right gi ply curve shows an inrease in the quantity supplied at each price Ss cunpiy cine riginal supply curve indicates a decrease in supply at each price Nurs ya ice over a specified period of time. 3. DETERMINANTS OF SUPPLY jon-price determinants. the or decrease, or the rise or They are briefly stated as an the supply of a commodity rises of falls due to n fall in is said to have increased or decreased. The increase b supply may take place on account of various factors. low: place due to changes § factors of it will result rise of fall in supply may take commodity. If the prices of variou tor Prices. Th {a particular commodity increase, production of a production © 1, Changes in Fac in the cost of production used in theion, There will be a rediiction in the sup, ‘ie amount demanded decreases with ay because I ous factors of production fall down the werrand so an increase in supply on vary” A of produc! in the increase of its total ¢ of that commodity at each price beca in price. Conversely, if the prices of the va ict will result in lowering the cost of pro prices. of a commodity ie a be affected by Any Sane, ‘ ique takes place in a partic)” dene era ean improvement in tecnniine rte ill result 2 brea! aress in technique. mets cost of Pro : v oe progress in technique. ar cing its cos ie : i ee y commodity. The supply curve y industry, it will help in in the supply of the c yy. if jon and so an ine production and shift to the right oe of Transport. The supply of a comniodity may als, Means s of communication and transport. If the then supply of the commodity can bg The supply ° al supply curve I the 3. Improvement in increase due to improvement 1 the mea creas rtransport are cheap and fa sans of transport are podyias nears short notice at lower price ' increased 2 A al P. » The sup of agricultural ic Changes in case of Agricultural Products. pply of agi 4. Climatic Chaney affected by the weather conditions and the use of the betty nducts is directly alfes x < : nd the us f roto of production. If rain is timely. plentiful, well-distributed; and improved methods of cultivation are employed, then other things remaining the same, there otho e will be bumper crops. It would then be possible to increase the supply of the } agriculture product The increase or decrease in supply may also take place due to ~ political disturbances in a country. If a country wages war against another country or some kind of polit disturbances take place just as we had at the time of Partition, then the channels of production are disorganised. It results in the decrease of certain goods. The supply curve shifts to the left of original supply curve. 5. Political Change: Taxation Policy. If a government levies heavy taxes on the import of a particular commodity or commodities, then the supply of these commodities is reduced at each price. The supply curve shifts to the’ left. Conversely. if the taxes on output ina country are low and government encourages the import of foreign commodities, then the supply can be increased casily. The supply curve shifts to the right of original supply curve, 2 Goals of firms. If the firms expect hi risk and produce goods on large scale The supply curve shifts to th gher profits in the future, they will take the Q resulting in larger supply of the commodity ie right. 4. BACKWARD BE We have stated earlier tha ometime exceptions to the rule, ‘illustrated in the NDING SUPPLY CURVE Neb curves are positively sloped. There can b° : There is a backward bending y " F as following schedule and a diagrams ending supply curve of labourWage rate (in Rs.) iingteeay day ay | 7 10 Te 20 12 | 30 13 | 50 10 | a ee | the figure (54). a labour is willing y In k for 10 hours a day at a wage rate 50) ae 10 per hour, When the wage rate ol to Rs. 30 per hour, he puts in 13 # rs of work. If wage rise to Rs. 50, he i prefers leisure to work and is willing to work for 10 hours only. ‘The supply Wages Per Hour me 8 . 20 curve SS° shows that a worker puts in less labour when wage rate rises above Rs, 10] 30.0 per hour.” The supply of labour then is negatively sloped and ‘is backward ° 46 8 40 aa bending. Fig.5.4 Working Hours Perosy The reasons of the backward bending supply curve of labour of leisure for work (2) increase in income which leads to rise commodities including leisure are (1) the substitution in demand of normal _ EXERCISES 1. Define ‘supply’. How will you distinguish it from stock? » Distinguish between ‘change in quality supplied’ and change in supply’ withthe help of diagrams. ty (il) * ; : on of supply (ii 3. How will you distinguish’ between (i) increase in supply and extention of sup decrease in supply and ‘contraction of supply"? . 2 4. Discuss in brief the main determination of supply? 5. Account for the changes in supply. y 2. et