Supply In Economics
“Supply” in economics refers to the
amount of a commodity that producers are able and willing to offer for
sale in a market at a given price. It represents how much the overall
market can offer.
The Price of the commodity, the cost of
production, inputs availability (machine / raw-material/ methodology /
money), government policies / rules / regulation, infrastructure
facilities, availability of transportation, export-import policies /
procedures, market form / structure, future expectation of business are
the various factors that determine the supply of the products / services.
The co-relation between price and
quantity supplied is known as Supply Relationship.
The Law of Supply demonstrates that unlike Law of Demand; there is
a direct relationship between price and quantity supplied, which means
other things being equal the higher the price of the product / services,
the higher the quantity supplied by the seller as he /she wants to
maximise its profits and vice-versa; thus; it demonstrates an upward
sloping curve. It can be presented in a tabular form (known as supply
schedule) or through graphical representation (known as supply curve).
However, the law of supply has certain
assumptions which state that the prices of the commodity should remain
constant; there should be no change in the cost of production /
transportation cost / technology / social and cultural values / economic
factors / political and legal environment / weather or environment
condition / government policies / taste and number of firms.
The different terms used in Supply concept of Economics are as
follows:-
1. Joint Supply: - When Supply of more
than one commodity comes from the same source it is called JOINT SUPPLY.
For example – Mutton and Wool, Paper and Wooden Furniture.
2. Composite Supply: - When supply of
a good and service come from more than one source it is called Composite
supply. E.g.: electricity / power.
3. Extension of Supply: - Extension of
Supply shows a direct relationship between supply and quantity demanded,
which means more is supplied at a higher price by the supplier and hence
it shows an upward slope.
4. Contradiction of Supply: -Contradiction
of Supply shows an inverse relationship between supply and quantity
demanded; thus it shows a downward sloping supply curve.
5. Elasticity of Supply: - It refers
to variations (extension and contradiction) in supply; which is stated by
the percentage of change in quantity supplied with respect to percentage
change in price.
Written By:
Rupal Jain,
is a Lecturer at Atharva Institute of
Management Studies (Mumbai) and she can be reached at
jainrupal@sify.com |
