• Supply refers to the

quantities of a good or
services that the seller
is willing and able to
Supply provide at a price, at
given point of time,
ceteris paribus
 • Price of the commodity (onions
in Guj)/inputs
• Cost of Production
• State of technology
Determinates
• Number of firms (how many of
of Supply them produce?)
• Government polices
• Expected future price
• Price of related goods
 The Law of supply states
that other things
remaining the same, the
higher the price of
Law of supply commodity, the greater is
the quantity supplied
 Scenario Price (Rs) Quantity
supplied
Supply Schedule
A 200 30

B 400 50

C 600 65

D 800 90

E 1000 120
 • Price of Inputs(high/Low)
• Price of related goods
• Number of suppliers(AGG
Why Supply curve supply –Increase/decrease)
change or moves? • Technology improvement
• Expected future
price(high/Low)
 #Price of commodity
#Cost of production
Determinants #State of Technology
of supply
#Government policies
#Number of firms
 •Elasticity of supply of a commodity is defined
as the responsiveness of quantity supplied to a
unit change in price of that commodity.

•Example: if 1 percent change in the price of

Elasticity of sugar leads to 5 percent change in its amount
supplied, the supply of sugar is said to be
Supply elastic.

•While if 1 percent change in the price of

tomatoes leads to 0.5 percent change in its
quantity supplied, the tomato supply is said to
be inelastic.
Price Elasticity of Supply
Perfectly Elastic Supply Perfectly In Elastic Supply
Curve Es = Curve Es = Zero
Infinity
Price

Price
S2

S1
Po S1
Po

S2
0 Quantity 0 Quantity
Price Elasticity of Supply
Relatively Elastic Supply
Unitary Elastic Supply Curve Curve
Es = One

Price

Price
S3 S4

Po
Po
S4 Es = more than one but
not infinity
S3
0 Quantity 0 Quantity
Price

S5

Relatively In Elastic Supply Curve

Es = less than one but not

equal to zero
S5
0 Quantity
 • Time
• Market Period
Determinants • Short Period
of Elasticity •Long Period
of Supply •-> The relationship between
minimum supply prices of
different firms
->The cost of attracting factors of
production
 • A situation where for a particular good supply =
demand. When the market is in equilibrium,
there is no tendency for prices to change. We say
the market-clearing price has been achieved.
• A market occurs where buyers and sellers
meet to exchange money for goods.
Market • The price mechanism refers to how
supply and demand interact to set the
Equilibrium market price and amount of goods sold.
• At most prices, planned demand does
not equal planned supply. This is a state
of disequilibrium because there is either
a shortage or surplus and firms have an
incentive to change the price.
Market Equilibrium
Price Supply Demand

15 10 50

20 15 40

25 30 30

30 45 15

35 70 10