Law Of Supply,
Supply Curve And Shift In Supply Curve
Any discussion on DEMAND can not be
Demand and Supply are like two sides
of a coin or two blades of a scissor.
As demand indicates the willingness of
a purchaser to buy a particular
commodity, SUPPLY means
WILLINGNESS OF THE FIRMS TO
SELL A PERTICULR COMMODITY.
QUANTITIES OF A GOOD OR
SERVICE THAT THE SELLER IS
WILLING AND ABLE TO PROVIDE
AT A PRICE, AT A GIVEN POINT OF
TIME, CETERIS PERIBUS.
Determinants Of Supply
1. Price of the Commodity:
Just like demand, the most important
determinants of supply is PRICE.
But unlike demand, Supply is POSITIVELY
RELATED to Price of the commodity.
With all the other factors remaining the
same, if the price of the product rises,
suppliers would find it more profitable to sell
Thus price has positive effect on quantity
2. Cost Of Production:
Production requires the transformation
of various inputs into output and involves
cost that includes prices of inputs i.e.
price of raw materials,
If the cost of production rises, say, due
to rise in the price of raw materials, supply
will definitely be reduced.
Example: company producing cotton
Price of raw cotton rises
rise in the cost of production
reduction in the production of shirts
reduction in the supply of shirts
Unless the supplier can transfer the
increase in the consumer by
3. State of Technology:
relationship with supply.
An improved technology reduces
cost of production per unit of output,
increase the supply of the product.
4. Number of Firm:
Increase in the number of producers of a
the supply of the
product in the market will increase.
If the entry is unrestricted, new firms will
continue to entre the market and causing
increase the supply and degree of the