1) Supply refers to the quantity of a good that producers are willing to offer for sale at different prices over a period of time. It depends on factors like the price of the good, prices of related goods, technology, and costs of production. 2) Individual supply is the quantity offered by a single firm, while market supply is the total quantity offered by all firms in the market. 3) The law of supply states that, all else equal, the higher the price of a good, the greater the quantity producers will supply. Supply curves graphically represent the relationship between price and quantity supplied.

1. THEORY OF SUPPLY MR. NITIN SETIA

2. TOPIC COVERED
•MEANING OF SUPPLY
•INDIVIDUAL SUPPLY / MARKET SUPPLY
•DETERMINANTS OF SUPPLY
•SUPPLY FUNCTIONS
•LAW OF SUPPLY
•EXTENTION AND CONTRACTION OF SUPPLY
•SHIFT OF SUPPLY CURVE

3. MEANING OF SUPPLY
Supply is the Quantity of a commodity which is offered for sale at a
given PRICE during some particular TIME.
SUPPLY AND QUANTITY SUPPLIED: Supply refers to various quantities
offered for sale at different possible prices of the commodity.
Quantity Supplied It refers to a specific quantity of a commodity that
the producers are ready to sale at a specific price of the commodity

4. INDIVIDUAL SUPPLY / MARKET
SUPPLY
•Individual supply refers to different quantities offered for sale by an
individual firm at different prices.
•Market Supply refers to the sum total of various quantities offered for
sale by all the individual firms at different prices

5. DETERMINANTS OF SUPPLY
Price of the commodity:- At a higher price, producer offers more quantity of the
commodity for sale and at a lower price, less quantity of the commodity is
offered for sale. There is a direct relationship between price and quantity
supplied.
Price of related Goods:- Supply of a commodity depends upon the prices of its
related goods, specially substitute goods. If the price of a commodity remains
constant and the price of its substitute good Z increases, the producers would
prefer to produce substitute good Z. As a result, the supply commodity x will
decrease and of good Z will increase.
State of Technology:- A change in technology of production which lessens cost
of production increases supply of the commodity. As against this, the supply of
those goods which are being produced with old and inferior technique causing
increase in cost of production will fall.
Cost of factor of Production:- A change in the cost of production, i.e., prices of
factors of production also affects the supply of a commodity. If wages of labor or
price of raw material increase, then cost of production will rise. As a result,
supply of the good will fall because producers would prefer to produce some
other goods that can be produced at a lower cost.
Objectives of Firm:- Sometimes, a firm may be induced to increase supply of a
good not because it is more profitable but because its supply is a source of
status and prestige in the market. Likewise, supply is also affected by the priority

6. SUPPLY FUNCTIONS
Supply Function It is a functional relationship between quantity
supplied of a commodity and factors affecting it. Supply of
commodity by a firm depends on
•price of the commodity itself(Pn)
•prices of other commodities(Pr)
•state of technology(T)
•cost of factors of production(F)
• objectives of the firm(O) etc.

7. LAW OF SUPPLY
The Law of Supply states that other things remaining constant,
quantity supplied of a commodity increases with increase in the price
and decreases with a fall in the price.
In simple words, law of supply means direct relationship between
price and quantity of demand. There is a positive relationship
between the quantity demanded of a good and its price.

8. SUPPLY SCHEDULE
• It shows the price and supply relationship.
• Tabular representation of price and supply.
price Qty supply
20 100
40 200
60 300
80 400
100 500
Supply schedule of good
x

9. SUPPLY CURVE
The geometrical representation of supply schedule is called the
supply curve.

10. ASSUMPTION OF LAW OF SUPPLY
Assumptions of Law of Supply:
Price of other related goods should not change
Technology of production should not change
Cost of production should remain the same
Goal of the firm should not change
Taxation policy of the govt. should not change

11. EXCEPTIONS TO THE LAW OF
SUPPLY
Law does not apply strictly to the agriculture products whose supply
is governed by natural resources.
Supply of goods having social distinction will remain limited even if
their price tends to rise.
Sellers may be willing to sell more units of a perishable commodity
at a lower price.

12. EXTENSION AND CONTRACTION OF
SUPPLY
Expansion of Supply It refers to rise in supply due to rise in the price
of good. It results in upward movement of the curve.
Contraction of Supply It refers to fall in supply due to fall in price of
the good. It results in the downward movement of the curve.

13. SHIFT OF SUPPLY CURVE
Shifts would occur on a supply graph with non price factors. A
positive shift would result in a rightward shift of the supply curve,
with more supply available at the same price.
An example of a positive shift could be due to a technological
advancement, making production cheaper and more efficient.
On the other hand a negative shift would result in a leftward shift of
the supply curve, with less supply being available at the same price.