Supply The term supply refers to the quantity of a good offered for sale at a given price. Like demand, supply is always with reference to a price and a point of time. Earlier we learnt that an inverse relationship exists between demand and price. In case of supply and price, a direct, relationship exists.

Law of supply The law of supply states that other things remaining equal, as the price of a commodity increases, its supply also tends to increase. At higher prices, more sellers are interested to produce more and each existing seller wants to sell more. When price declines, the opposite holds good.

Supply schedule The law of supply could be explained with the help of supply schedule and curve. Supply schedule is a statement of quantities of good and the corresponding prices at which producers are willing to supply.

Supply curve The supply curve has a positive slope and it mores upwards to the right It is a graphical representation of the supply schedule which explains the law of supply.

Supply determinants The supply of a commodity is determined by many factors some of which are listed below: i) Price of the good which is to be supplied ii) Price of other goods iii) Prices of factors of production iv) Number of producers or sellers v) Entry of new firms vi) Technology vii) Government policy viii) Discovery of new raw materials

Kinds of supply elasticity There are two limiting cases of elasticity of supply which are of economic significance. i) Elasticity of supply equal to infinity ii) Absolutely inelastic supply Another way of expressing the range of elasticity is that elasticity of supply is greater than one, less than one or equal to one.

Kinds of Elasticity of supply

Measurement of elasticity supply Elasticity of supply can be measured by using two methods: i) The point method and ii) The Ratio method The Point Method On the given supply curve the price elasticity at a point is measured by the distance along a tangent to the horizontal axis divided by the distance along it to the vertical axis

The Ratio Method The co-efficient of elasticity of supply is obtained by using the ratio method as follows: The co-efficient of elasticity of supply varies from zero to infinity.