2. Law of Supply
Law of supply states that other things remaining the same, the
quantity of any commodity that firms will produce and offer for
sale rises with rise in price and falls with fall in price.
i.e. Higher the price, higher will be the quantity supplied and
lower the price smaller will be quantity supplied.
‘Other things remaning the same ‘ means determinants other
than own price such as technology, goals of the firm,
government policy, price of related goods, etc. should not
change.
3. Supply schedule
Price(in Rs) Quantity supplies(in kg)
10 1
20 2
30 3
40 4
Supply schedule is tabular statement showing various
quantities which producers are willing to produce and sell at
various alternative prices during a given period of time.
It may be individual supply schedule or market supply
schedule.
4. Supply curve
Supply curve is a graphical
representation of supply schedule.
By plotting various combinations of
price and quantity supplied of the
table, we can derive an upward
sloping of the table as shown in the
figure.
Supply curve slopes upward from
left to right which means positive
supply.
0
10
20
30
40
50
60
70
0 1 2 3 4 5 6 7
Y-Values
5. Exceptions
Auction sale
The law of supply states that quantity supplied increases with increase in prices and
vice-versa. An auction sale takes place at the time when the seller is in financial crisis
and needs money at any cost.
Price exception of seller
If the seller expects that the price of the commodity is going to fall in near future, he
will try to sell more even if the price is very low. On the other hand, if the seller
expects future rise in price of the commodity. He will not sell more even if the price
level is high. It is against the law of supply.
Stock clearance sale
When a seller wants to clear its old stock in order to store new goods, he may sell
large quantity of goods at lower prices. It is also against law of supply
6. Exceptions
Fear of being out of fashion
As we know that quantity supplied of a commodity is affected by fashion, taste and
preferences of the consumer, technology and time. If the seller thinks that the goods
are going to be outdated in near future, he sells more at a lower price which is also
against the law of supply.
Perishable goods
Those goods which have very short life and they become useless after that are all
perishable goods. Those goods must be available in market at its right time whatever
be its price. So the seller becomes ready to sell his goods at any offered price. This is
also against law of supply.
