Learning Objective: Supply, Supply Schedule and Curve, Law of Supply and Elasticity of Supply

Lecture-13
SUPPLY
Learning Objective: Supply, Supply schedule and curve, law of

supply and elasticity of supply
Supply means the quantity offered at certain in a certain market at a particular
time. The term stock means the total amount of a commodity in existence,
whereas, supply means that part of stock which is offered for sale at a certain
price at a certain time in a certain market.
Supply Schedule and Supply Curve:

A supply schedule means a table which shows quantities of a given commodity
offered for sale at all possible prices at a given time in a certain market. For
example supply schedule is shown as below.
Price
30
45
50
80
Quantity
150
200
250
300
The graphic presentation of a supply schedule is called supply curve. The supply
curve represents the maximum quantities per unit of time that will be offered for sale at
various prices. The quantity supplied varies directly with the price.
Law of Supply:
As price rises, other things remaining the same, the quantity offered for the sale
tend s to increase, and as price falls, the quantity offered for the sale will tend to
decrease. This tendency of the changes in supply as a result of changes in price is
called law of supply. There are some exceptions to this law, which are:
1. During depression, when prices fall, the producers may sell more in order
to avoid losses
2. Some time more is sold in order to finish old stocks.
3. At time of auction, goods may be sold at any price and law of supply does
not apply.
Increase/ Decrease and extension/ contraction of supply:

The variations in the price of a commodity cause extension or contraction of
supply. As price of a commodity rises quantity supplied also increases.
Similarly, with fall in price, quantity offered for sale decreases. The movement
along the same supply curve with variations in price results into extension or
contraction in supply.
Contraction in supply
Extension in supply
When supply changes on account of variations in other factors such as cost of
production, changes in the production technology, weather etc, it is called shift
in supply or increase or decrease in supply.
Increase in supply
Decrease in supply
Elasticity of supply:
Extension or contraction in supply takes place as result of changes in the price.
This extension or contraction of supply caused by price changes is called
elasticity of supply.
Elasticity of supply =
% change in quantity supplied
% change in price.
Degrees of elasticity of supply:

The elasticity of supply is equal to zero, when there is no change in supply as a
result of change in price. The supply curve is perpendicular or vertical to Y-axis
as shown below.
The elasticity of supply is more than one, when with a small change in price,
there is considerable or more than proportionate change in suppl y. It is called
highly elastic supply.
The elasticity of supply is equal to one, when there is proportionate change in

supply as a result of change in price. . It is called elastic supply.
The elasticity of supply is less than one, when with the considerable change in
price, there is little or less than proportionate change in supply.
The elasticity of supply is infinite or perfectly elastic, when any amount or

quantity of a commodity can be supplied at the same price. Under these
conditions supply curve is horizontal to X-axis.
Questions
1Supply curve slopes
a) Downward from left to right
b) Upward from left to right
c) Downward from right to left
d) Upward from right to left
2. The diagrammatic representation of supply schedule is
a) Demand curve
b) Cost curve
c) Production curve
d) Supply curve
3 The change in the price of a commodity causes
a) Change in supply
b) Change in quantity supply
c) Both a and b
d) All the above
4. When price of a commodity increases, its quantity supplied
a) Remains the same
b) Falls
c) Increases
d) None of the above
5. The following are the exceptions to the Law of Supply. Which of the following is not
correct?
a) During depression, the producers may sell more in order to avoid losses
b) Some time more is sold in order to finish old stocks.
c) At time of auction, goods may be sold at any price and law of supply does not
apply.
d) Change in the prices of the commodity
Answers
1 b)
2 d)
3 b)
4 c)
5 d)

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Lecture-13

Learning Objective: Supply, Supply schedule and curve, law of

Supply Schedule and Supply Curve:

Increase/ Decrease and extension/ contraction of supply:

% change in quantity supplied

Degrees of elasticity of supply:

The elasticity of supply is equal to one, when there is proportionate change in

The elasticity of supply is infinite or perfectly elastic, when any amount or

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