SUPPLY

Prepared By:
Dr. Manjusha Goel
Associate Professor
 Supply of a commodity refers to a schedule
showing various quantities of commodity
that the producers are willing to sell at
different possible prices of the commodity at
a point of time.
DETERMINANTS OF SUPPLY
 PRODUCT PRICE

 PRICES OF RELATED PRODUCTION

 COST OF FACTOR OF PRODUCTION

 STATE OF TECHNOLOGY

 GOVERNMENT POLICY

 OBJECTIVE OF THE FIRM

 FUTURE EXPECTATIONS

 NUMBER OF SELLERS
SUPPLY FUNCTION
When we express the relation between supply & its
determinants mathematically, the relationship is known as
Supply function.

➢ Price of the commodity X (Px)

➢ Cost of Factor of Production (C)
➢ State of Technology(T)
➢ Government Policy (G)
➢ Other Factors (N)
➢ Sx = f( Px, C, T, G,N)
SUPPLY SCHEDULE
A Supply Schedule is a tabular statement that states
different quantities of a commodity that would be
supplied at different prices. Supply Schedule are of
two types:-
(i) Individual Supply Schedule
(ii) Market Supply Schedule
TABLE FOR LAW OF SUPPLY
PRICE SUPPLY

 10 100
 11 200
 12 300
SUPPLY CURVE
 A Supply Curve shows the relationship between
price of a commodity and the quantity supply by
the producers graphically. Supply curve slopes
Upwards.
 Y

S1

P1

O X
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 its price.
ASSUMPTIONS OF THE OF
SUPPLY
 No change in the prices of the
factors of production.
 No change in the prices of related
goods.
 No change in the goals of the firms.
 No change in the state of technology.
 No change in the no. of producers.
CHANGES IN QUANTITY CHANGES IN SUPPLIED
SUPPLIED

SHIFTS IN SUPPLY CURVE

MOVEMENTS ALONG THE DEMAND CURVE

Extension of Contraction of Decrease in Increase in supply

demand demand Supply in supplyIn supply curve
curve

Caused by Caused by Caused by change in factors other

Decrease in price Increase in price Than price of the commodity
The same of the same
commodity commodity
PRICE OF Quantity DESCRIPTION
ICECREAM supplied

RISE IN PRICE
1 1
Extension of
5 5 supply
5

1
0 1 5
EXTENSION OF SUPPLY
Increase in quantity supplied of a commodity due to rise
in its price is called extension of supply
 Extension of supply
Contraction of supply :decrease in quantity
supplied due to fall in its price is called contraction of
supply.
Price of ice Quantity description
cream supplied

5 5 Fall in price

1 y 1 Contraction
supply
s
5 B

1
A
s
0 x
1 5
Increase in supply increase in supply occurs when quantity
supplied increase at the existing price of the commodity and
other factors will be change.
price Quantity
10 20 Increase in supply

10 30
y s1
s2

10

0
x
20 30
Decrease in supply: decrease in supply occurs when
quantity supplied decrease at the existing price of the commodity.

PRICE QUANTITY
10 30

10 20

Y
S2
S1
PRICE(RS)

B A
10

X
0 10 20 30
QUANTITY(UNITS
CAUSES OF DECREASES IN SUPPLY
1.Use of outdated technology.
2.Fall in the price of related goods.
3.Decrease in the no of farms in the market.
4.Firm expect rise in price of commodity in
future.
5.Increases in price of factors of production
causing increase in cost of production.
PERFECTLY ELASTICITY SUPPLY: In this case supply
increase or decreases automatically without being any change in
the price.
PRICE(RS) SUPPLY
10 8
10 10
y

Perfectly elastic

s
price

O x
Q1 Q2
quantity
The supply of a commodity is categorized as inelastic when there
is no change in the quantity supplied despite a rise or fall in the
price of the commodity.

PRICE SUPPLY
0 8
10 8

Y S
P1
price

0 Quantity S X
UNITARY ELASTICITY :The supply of a commodity
is said to be unitary elastic when the proportional change in supply
is equal to proportional change in price.
PRICE SUPPLY
10 20
15 30

y
s
p1 A
PRICE

p B
s
0 x
S S1
QUANTIT
PRICE QUANTITY
10 10
15 12

p1 s
price

p
s

o s1
quantity s x
RELATIVELY INELASTIC :In this case proportionate
change in supply is less than the proportionate change in price .

PRICE SUPPLY
10 10
15 20
y s
A
p1
Price

p
B
s
0 s s1 x
quantity
Factor determining elasticity of
supply
 Nature of inputs used
 Natural constraints
 Nature of the commodity
 Time
 Technique of production
 Cost of production
Importance of elasticity of supply
MARKET EQUILIBRIUM
 Equilibrium refers to a state of balance that can occur
in a model showing a tendency of no change.

 Market equilibrium implies that there is neither excess

demand nor excess supply.
 Equilibrium in the market occurs when that prices is
reached where the demand for and supply of a
commodity are equal to each other.
 When the supply and demand curves intersect, the market is
in equilibrium. This is where the quantity demanded and
quantity supplied are equal. The corresponding price is
the equilibrium price or market-clearing price, the quantity is
the equilibrium quantity.

 Market Equilibrium Mathematical notation:

 Qd (P) = Qs (P)
Market Equilibrium Graphically :
THANKS !