1. Supply
Supply is the quantity of a commodity that the producer is writing to sell in the market at
a given price in given period of time
Features :-
(i) Supply is a desired quantity of commodity which a producer is willing to sell not the
actual quantity of commodity which the producer is selling in the market.
(ii) Supply is always expressed in terms of price.
(iii) Supply is a flow because it is measured over a period of time.
Determinants / Factors :-
(i) Price of the commodity :- Price & the quantity of the commodity are in direct
relationship between each other because the main aim of the producers is to
maximize the profit that is why he sells more at higher prices & lesser at low prices.
(ii) Price of related goods :- Supply of commodity also depends upon price of related
goods. Eg : Substitute goods
Producers always have a tendency to, shift over to substitute goods in case their prices
are higher than the price of the commodity sold by the producer.
(iii) Goals of the firm :- There are 3 types of goals of sellers.
a) Profit maximization :- In this case, higher is the profit higher will be the amount
supplied by the firm & vice – versa
b) Sales maximization :- In this case, firms will never think about profit margins & price of the
product. They will keep on increasing the supply of product without considering the price
c) Risk minimization :- In this case, firms may play safe & produce & supply a smaller quantity of
product.
(iv) Input price/ factor price/ cost of production :- Input price is known as the price
paid for all types of factor of production. In case of high cost of production with given
price, profit margin reduces & the supply of the commodity also reduces. On the
other hand, with the decrease. In input prices at the given price of the commodity
profit margin increases & the quantity supplied also increases.
(v) State of technology :- With a better technology efficiency of the producer increases
& the output also increases which increases the quantity supplied of the commodity.
On the other hand, if there is outdated & inefficient technology used in production the
output decreases & supply will also decrease.
(vi) No. of producers :- Quantity supplied also depends on the no. of producers. Lesser no of
producers lower will be the supply of the commodity. Larger no of producers higher will be
the supply of the commodity.
(vii) Future expectations regarding change in price :- If higher prices are expected in future
lower will be the supply of product at present. On the other hand. If lower prices are
expected in future higher will be the supply at present.
(viii) Taxes & subsides :- Higher taxes imposed by the govt. will increase the price of the
commodity & the cost of production will also be increasing which reduces the profit
margin & the supply will also decrease & vice – versa.
In case of subsidies, the price of the product reduces and it will reduce the cost
of production which increases the profit margin & the supply also increases.
(ix) Natural factors :- Natural factors are responsible for the supply of agricultural
products. In case of favourable climatic conditions production in agriculture sector
will increase & supply also increases on the other hand, it the climatic conditions are

2. unfavorable eg. Droughts, flood & famine the agriculture will be adversely affected &
the supply & production both will be decreased.
(x) Means of transport & communication :- Highly developed means of Transport and
communication will increase the availability of raw material, labour & other facilities of the
production with that output increases & the supply also increases.
(xi) Supply Function :- Supply function is the functional relationship between quantity supplied
of a commodity & its determinants
Sx = F (Px, Pr, T, G T&S, G ……………….)
Law of supply :-
It states other things being equal supply of a commodity changes directly with the
change in its price. Main assumption of law of supply is cetris paribus i.e. other things
remaining the same.
Other assumption :-
1. Price of related goods should remain same
2. Goal of the firm should not change.
3. Input prices should remain same.
4. Taxation policies should remain same
Supply schedule: - is a table which shows various quantity of commodity. Which the producers
are willing to produce & sell at various prices during a given period of time.
2 Types of Supply schedule :-
(i) Individual supply schedule: - is defined as a table which shows various quantity of
commodity. which an individual producer offers for sale during a given period of time at,
different prices
Price Quantity supplied
2 4
4 6
6 8
8 10
10 12
(ii) Market supply schedule :- of a commodity is a table which shows various quantity of
commodity that all the firms are willing to supply at each market price during a given period
of time
Price A B C D Table
2 - 1 2 3 6
4 1 2 3 4 10
6 2 3 4 5 14
8 3 4 5 6 18
10 4 5 6 7 22
12 5 6 7 8 26
Supply cure is the graphic presentation of Supply schedule It is of two types :
Individual Supply curve :- is defined as the curve which shows various quantity of given commodity
which an individual producer is willing to supply at different given prices during given period of time.

3. Y S
Price 10
8
6
4
2 S
O 2 4 6 8 10 12 X Qty
(i) Market supply curve :- is a cure which shows various quantity of a commodity.
Which all the producers are wiling to & sell at different price during the given period
of time.
Y
AB C D
12 5 5 5 5
Price 10 T.S. S
8
6
4
2 S
O 2 4 6 8 10 12 14 16 18 20 22 24 26 X Qty
Reasons for supply curve moving upwards :-
1. Price & quantity relationship :- Due to a direct relationship between price & quantity
supplied supply curve is upward sloping. It shows with the increase in the price the
quantity supplied increases & with decrease in the price the quantity supplied also
decreases.
2. Entry of new firms :- In case of lesser no. of firms supply of the commodity. will be less/
low. If there is increases in the no of firms in the market the quantity supplied also
increases. This shows a direct relationship between no. of firms & quantity supplied in
the market due to which we have an upward sloping supply curve.
3. Goal of earning higher profit :- In case of increase. in cost of production profit margin
of the producer decreases thus quantity supplied of the commodity also decreases. On
the other hand with decrease in cost of production profit margin increases thus quantity

4. supplied of the commodity also increases which shows upward movement due to direct
relation between profit & quantity supplied.
There are 2 exceptions to law of supply
1. A vertical straight line supply curve // to Y- axis :- It happens in the case of highly perishable
commodity. supply for which cannot he increased or decreased due to their highly perishable
nature for example- fish, milks and milk products, leafy vegetables etc.
Y
S
Price
P3
P2
P1
P
S
O Q X Qty
2. Backward sloping supply curve :- This type of supply curve might occur in the case of Labourers
in terms of no of hours worked. In this case to some extent supply of Labourer increases with
increase in the wages but after a certain point supply of Labour starts decreasing even if the
wages are increasing? This shows after a certain wage- level Labourers like to enjoy more leisure
than to do work. Thus this peculiar Nature of them gives a backward bending supply curve which
is an exception to the law of supply.
S
Y
Wages W5
W4
W3
W2
W1
O X Laboures
L5 L1 L2 L3
Movement along the Supply curve & shift of the Supply curve.

5. 1. Movement along the Supply curve OR change in quantity supplied :- Change in
quantity supplied refers to a movement along the same supply curve. due to change in
the price of the commodity. There are two types of movement of it.
a) Extension b) Contraction
a) Extension OR Expansion of supply :- refers to increase in quantity supplied due to
rise in the price of good. It is an upward movement on the same supply cure
b) Contraction :- it refers to the decrease in quantity supplied due to fall in the price of the good. It
is a downward movement on the same supply curve
Y S
Price P3
Extension
P1
P2
S
Contraction
O Q2 Q1 Q3 X Qty
2. Change or shift of the Supply curve :-
Change in supply means change in total supply, shift of supply curve take place due to
change in the factors other than product price.
There are 2. Types of movements in this
a) Increase b) Decrease
a) Increase :- In a shift of supply curve a new supply curve is drawn. When the supply of a
commodity increases. due to favorable changes in factors other than the price of the
product it is called increase in supply. In such a case there is a rightward shift of the
supply curve which is caused due to the following factors :-
• Improvement in technologies
• Decrease in cost of production
• Change in the goals of the firm
• Increase. in the no of firms.

6. Y S S1
Price
P
S
S1
Increases
O Q Q1 X Qty
b) Decrease in supply curve :- When the supply of the commodity decreases due to
some unfavorable changes in the factors other than the price of the goods the supply
curve shifts to the left ward which is known as Decrease in supply.
The unfavorable changes are responsible for decrease in supply are :
• Obsolete technique of production.
• Increase. in price of related goods.
• Increase. in cost of production.
• Decrease. In no of firms
Y S2 S
Price
P
S2
S
Decrease
O Q Q1 X Qty
Elasticity of supply :- refers to responsiveness of quantity supplied to the change in its
own price
Es = % Change in quantity supplied
% Change in price
Degree of it price elasticity of supply :-

7. 1. Perfectly in elastic :- In this case, change in price does not effect the quantity supplied
at all. Supply curve. in this case will be a vertical straight line // to Y-axis. The Elasticity
of supply will be zero It happens in the case of highly perishable goods.
Y
Price S
P2
Es = 0
P
S
P1
S
O Q X Qty
2. Perfectly elastic :- When quantity supplied changes without any change in the price or little
decrease. in the price will bring quantity supplied to zero is known as perfectly elastic supply.
Supply curve in this case will be a horizontal straight. line // to X – axis & elasticity of supply =
∞
Y
Price Es = ∞
P
O Q Q1 Q3 X Qty
3. Unitary elastic supply :- When % change in quantity supplied is equal to the % change
in price is known as unitary elastic supply. Supply curve in this case will be upward
sloping starting from the origin & the elasticity of supply will be 1 (Es = 1)

8. X S
Price
P
Es = 1
P1
S
O Q1 Q2 Y Qty
4. More than unitary elastic OR elastic supply :- When % change in quantity supplied is greater
than % change in price is known as elastic supply OR > unitary elastic supply. Supply curve in this
case will be upward sloping starting from Y – axis & Es > 1
Y
Price
P1
Es > 1
P
O Q Q1 X Qty
5. Inelastic Or less than unitary elastic supply :-
When % change in qty. supplied is less than % change in price is known as inelastic or
less than unitary elastic supply curve in this case will be upward sloping originating from
X – axis Es < 1
Y S

9. Price
P1
P Es < 1
S
O Q Q1 X Qty
For measurement of elasticity of supply we have 2 methods :-
1. Percentage Method
2. Graphic method
Determinants / factors affecting elasticity of supply
(i) Time factor :- Short period :- In this period elasticity of supply will be less in
comparison to long period. Thus, elasticity of supply will be higher in the long period
because producers will have enough time to produce more quantity & bring it to the
market.
(ii) Nature of the commodity :- Perishable goods will be less elastic in comparison to durable
goods, durable goods will have very high elasticity because they can be stored & producers
can easily meet the demand of the consumers.
(iii) Production Capacity :- Flexible production capacity higher will be elasticity of supply. Rigid
production capacity – lower will be elasticity of supply
(iv) Future price expectation :- If price rise is expected in future elasticity of supply of the
commodity will be low at present. On the other hand if fall in the price is expected in the
future the elasticity of supply will be very high at present.
(v) Nature of input :- If input req. for the production is easily available the supply of the
product would be more elastic. On the other hand, if it uses specialized inputs its
supply will be relatively inelastic.
(vi) Behaviors of cost of production :- If there is increase in the cost of production the
elasticity of supply of the good will be low due to decrease in the profit margin. On
the other hand, a lower cost of production will have elastic supply of the product
because profit margin in this case will be high.
(vii) Risk taking :- If entrepreneurs are risk taking supply will be more elastic On the other hand,
if they are hesitant in taking risk supply will be inelastic.
Time Period
(i) Market period OR Very short period :- It is the time period in which supply remains
constant. It does not change with the change in price. It deals with highly perishable
commodities like fish, milk & its products etc. supply curve in this case will be a
vertical straight line // to Y – axis
(ii)
Y S

10. Price P3
P
P1
P2
O Q X Qty
(iii) Short period :- It is the time period when supply can be adjusted to some extent It
deals with semi durable goods like fruits, vegetables, bakery products etc. supply
curve in this case will be upward sloping originating from X – axis
Y S
Price
S
O X Qty
(iv) Long period :- It is the time period when supply can be adjusted to large extent. It deals with
durable goods like clothes, utensils etc. Supply curve in this case is upward sloping
originating from Y – axis.
Y

11. Price ` S
S
O X Qty
(v) V. Long period :- It is the time period when supply can be adjusted to any extent is known as
V. long period. It deals with highly durable goods like electronic goods, furniture’s etc.
Supply curve in this case is almost a horizontal straight line.
Y S
Price
S S
O X Qty
Difference b/w stock & supply
Basic of diff. Stock Supply
1. Meaning Refers to the total amount of goods Means quantity of commodity
which producers & seller are ready do that are offered for sale in the
offer for sell at a particular point of market in given period of time
time. at the given price
2. Dependence Stock Of the commodity mainly Supply Of a commodity.
depends on depends mainly on the market
a) Production of commodity . price of the commodity
b) Procurement price
c) Storage & transport cost
3. Concept It has a stock concept i.e. stock refers It is a flow concept i.e. it refers
to amount of a commodity. at a to the amount of a commodity

12. particular point of time during a period of time.
4. Commodities In case of highly perishable In case of durable commodity.
commodity. stock & supply would supply consists only a part of
almost he same since these items total stock
cannot be stoked for a long period.
5. Objective The stock of any commodity. helps in Enables the firm to earn sales
checking fluctuations of market price. revenues
Long Answer Questions :-
Q.1. What is supply. Explain its factors affecting supply.
Q.2. Explain the law of supply with its assumptions & graph.
Q.3. Give reasons for upward sloping supply curve. is there any exception to it.
Q.4. Differentiate between change in quantity supply & change in supply (Meaning, types of
movements, direction of movement, causes, graph)
Q.5. Explain the degrees of price elasticity of supply.
Q.6. What is elasticity of supply explain the factors effecting it.
Q.7. Explain the relationship of supply curve with the time period.