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    Law of Supply: Presented By: Dudhat Kenal S. STD: IMBA SEM-3

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    Alitariq878
    The law of supply states that, all else being equal, as price increases, quantity supplied increases, and as price decreases, quantity supplied decreases. There is a positive relationship between price and quantity supplied. The document then discusses determinants of supply such as costs of production, technology, prices of related goods, and government policies. It provides an example of a farmer supplying different quantities of wheat at various price levels to illustrate the law of supply.

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    Law of Supply: Presented By: Dudhat Kenal S. STD: IMBA SEM-3

    Uploaded by

    Alitariq878
    10 views16 pages
    The law of supply states that, all else being equal, as price increases, quantity supplied increases, and as price decreases, quantity supplied decreases. There is a positive relationship between price and quantity supplied. The document then discusses determinants of supply such as costs of production, technology, prices of related goods, and government policies. It provides an example of a farmer supplying different quantities of wheat at various price levels to illustrate the law of supply.

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    The law of supply states that, all else being equal, as price increases, quantity supplied increases, and as price decreases, quantity supplied decreases. There is a positive relationship between price and quantity supplied. The document then discusses determinants of supply such as costs of production, technology, prices of related goods, and government policies. It provides an example of a farmer supplying different quantities of wheat at various price levels to illustrate the law of supply.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    10 views16 pages

    Law of Supply: Presented By: Dudhat Kenal S. STD: IMBA SEM-3

    Uploaded by

    Alitariq878
    The law of supply states that, all else being equal, as price increases, quantity supplied increases, and as price decreases, quantity supplied decreases. There is a positive relationship between price and quantity supplied. The document then discusses determinants of supply such as costs of production, technology, prices of related goods, and government policies. It provides an example of a farmer supplying different quantities of wheat at various price levels to illustrate the law of supply.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 16

    Law of supply

    Presented by: dudhat kenal s.


    Std: IMBA SEM-3
    Definition:
    • “Other things remaining same, when price of a
    commodity increases its quantity supplied increases
    and if price of a commodity decreases, quantity
    supplied also decreases”.

    • There exist a positive and direct relationship


    between price and quantity supplied of a
    commodity. Following terminologies are used while
    expressing law of supply:
    • Quantity supplied=Qs
    • Price=P
    Cases of rise and fall in supply or determinant of
    supply

    • We assume some factors constant while


    describing law of supply, those factors are
    known as determinants of supply. Some of them
    are described below.
    1) Change in factors prices.
    2) Change in Technology.
    3) Means of transport and
    communications.
    4) Scientific Development.
    5) Union of Sellers.
    6) Trade Policy.
    7) Industrial Expansion.
    8) Change in price of a Substitute.
    Determinants of Supply

    • Technology
    ▫ If more efficient technology is discovered
    production costs will fall
    ▫ So suppliers will be more willing and able to
    supply more of the good at each price
    • Price of Relevant Resources
    ▫ Those resources employed in the production of a
    good.
    Determinants con…

    • Prices of Alternative Goods


    ▫ Price of good that use some of the same resources
    as used to produce the good in question
    • Producer Expectations
    ▫ Shift production according to future prices
    • Government Restrictions
    ▫ Taxes, quotas, licenses, etc.
    Assumptions
    • Following are assumptions of law of supply
    which are held constant while describing law of
    supply.
    1. No Change in cost of Production
    2. No Change in technology
    3. No Change in climate
    4. No Change in Price of Substitutes
    5. No Change in Natural Resources
    Explanation
    • Let’s see this example to understand law of
    supply. Assume that you are a farmer and you
    are producing wheat. If price of per bushel of
    wheat is $1 you will only produce 5 bushels of
    wheat, if price increases to $2 you will increase
    your supply to 20 bushels, And if price again
    increases to $3 you will produce 35 bushels, And
    at $4 you will produce 50 bushels And if price
    are at their top i.e $5 then you will produce 60
    bushels. You can see the table below.
    Explanation
    P

    Price (per latte)


    P Qs
    $5 60

    4 50

    3 35

    2 20

    1 5
    10 20 30 40 50 60 70 Q
    Quantity Supplied (lattes per month)
    Change in Supply
    • There are two type of changes in Supply. The one is
    movement of supply or extension and
    contraction of supply and other is shift in
    supply.
    • Movement of supply:

    Other things remaining same, All change in quantity


    supplied resulting from the change in price factor, is
    called the movement of supply. If supply curve
    moves on left side then it means that supply
    decreases and if curve moves toward right side it
    shows that supply increases.
    • Let consider the above example
    when price moves from $1 to 2,3,4,5
    Quantity Supplied increases from
    5kg to 20,35,50&60Kg this is known
    as extension of supply and if we see
    this phenomena from reverse side
    when price is decreasing from 5$ to
    1$ Quantity supplied is also
    decreasing from 60 to 5Kg. This is
    known as Contraction of supply. Let
    see it clearly through diagram.
    Chart Title

    5 5

    4 4
    Price

    3 3

    2 2

    1 1

    0
    5 20 35 50 60
    Exceptions to law of supply
    • There are certain commodities
    the supply of which
    .eg. Rare goods
    such as classical paintings, old
    manuscripts, old coins etc. In
    some cases the supply cannot be
    increased in short run like
    agricultural products. Here the
    supply curve will be vertical
    straight line parallel to Y axis.
    SHIFT IN SUPPLY CURVE
    What is an increase in supply?
    Or rightward shift in supply curve?
    • It refers to a situation when
    the producers are willing to
    supply a larger quantity of
    the commodity at the same
    price or same quantity at
    lower price.
    • The reasons may be…
    improvement in
    technology, decrease in
    input prices, fall in the
    prices of related goods.
    conclusion

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