Law of Supply

Law of Supply - increased at the same old price since the...

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Law of Supply: The law of supply can be stated as follows: "Ceteris paribus , the quantity of a good supplied will rise (expand) with every rise in its price and the quantity of a good supplied will fall (contract) with every fall in its price." In a functional form this can be stated as : q s = f (P) [T, R, P] const. The quantity of a commodity supplied is thus a function of its own price . There exists a direct relationship between the quantity supplied and the price of a commodity. It is subject to the condition that other things should remain constant. In this case ‘other things’ include mainly two things. These are technical conditions or methods of production (T) and the prices and quantities of the resources supplied (RP). With improved technical conditions, supply can be
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Unformatted text preview: increased at the same old price, since the cost of production can now be reduced. Similarly with an enhanced supply of resources and a reduction in the prices of resources such as land, labor , raw materials etc. an increasing quantity of the commodity can be supplied at a constant or even falling price. Figure 4 Figure 4 is the graphical representation (the supply curve ) of the supply schedule. It begins at the point of origin where both quantity supplied and price are zero in value, and then it continuously rises upwards. This upward sloping curve indicates the positive relationship between supply and price: there is a rise in the quantity supplied with every successive rise in the price....
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