HEC Group of Institutions, HARIDWAR

Topic : Supply Analysis

Presented by
Deepshikha Bohra
Astt. Professor
Supply

Supply means the quantity of a commodity which

it’s producers or sellers offer for sell at a given
price, per unit of time.
The supply of a commodity depends on its price and
cost of its production.
In other words, supply is however expressed
generally in terms of price quantity relationship.
Supply function
Determinants of supply
Factors affecting supply
Sx = f( P, Pr, C, T, O)
 Price The higher price, more quantity will be offered for
sale on account of rise in its profitability and vice versa.
 Price of related goods If the price of a substitute goods
goes up the producers will be tempted to produce that
good to get higher profit.
 Cost of production If the prices of the factors of
production( raw material, land, labour, capital) rise, the
total cost of production goes up. In such situation, the
producers will divert their resources to the production of
some other commodity.
 State of technology Improvement In technologyor
methods of production reduce cost of production and
increase the profit this increases supply upward.

 Others Taxation and other government policies, fear of

war, strike, business condition, natural factors, nature of
the commodity, numbers of firms etc.
Law of supply

The law of supply can be stated as follows-

The supply of a product increases with the increase
in it price and decreases with decrease in its price,
other things remaining constant.
It implies that the supply of a commodity and its
price are positively related.
This relationship holds under assumption that other
things remaining constant.
Assumptions of law of supply

 There should be no change in cost of production.

 There is no change in price of related good.
 Technology should remain constant.
 There should be no change in number of firms.
 There should be no change in goal of the firm.
Supply Schedule

 Supply Schedule is the tabular statement that gives different prices of such
commodity and the quantities which a producer is willing to supply per unit of
time.

Price Quantity supplied

1 5

2 10

3 15

4 20
Supply Curve

 Supply curve is the graphical presentation of

supply schedule.

Note: Draw the graph of supply schedule given in

previous slide.