The Law of Supply states that when the price of a commodity falls, its supply decreases and when the price of a commodity rises, its supply increases; other things remaining constant. Supply refers to the amount of quantity that a firm is willing to produce or offer for sale in the market. Supply schedule can be defined as a relation between the price of goods or services versus and the number of goods supplied. Now let us discuss the Supply Schedule in detail.
We can express the Supply of a commodity in the following three alternative ways:
- Supply function
- Supply schedule
- Supply curve
Let us now study each of these ways.
Browse more Topics under Basic Elements Of Demand And Supply
- Determinants of Demand
- Law of Demand
- Demand Schedule
- Individual and Market Demand Curve
- Change in Demand
- Exceptions to Law of Demand
- Concept and Determinants of Supply
- Law of Supply
- Individual and Market Supply Curve
- Change in Supply
- Exceptions to Law of Supply
- Equilibrium Price
- Price Elasticity of Demand
- Cross Price Elasticity of Demand
- Income Elasticity of Demand
- Price Elasticity of Supply
The supply function of an individual supplier expresses his behaviour in relation to what he offers at the prevailing prices in the market in the algebraic form. In supply function, quantity supplied is expressed as a function of various variables.
SX = f(PX, CX, TX)
SX = Quantity supplied
PX = Price of the commodity
CX = Cost of production
TX = Technology of production
It is a statement in the form of a table that shows the different quantities of a commodity that a firm or a producer offers for sale in the market at different prices.
It denotes the relationship between the supply and the price, while all non-price variables remain constant. There are two types of Supply Schedules:
- Individual Supply Schedule
- Market Supply Schedule
Individual Supply Schedule
It is a supply schedule that depicts the supply by an individual firm or producer of a commodity in relation to its price. Let us understand it with the help of an example.
|Price per unit of commodity X (Px)||Quantity supplied of commodity X (Dx)|
The above schedule depicts the individual supply schedule. We can see that when the price of the commodity is ₹100, its supply is 1000 units. Similarly, when its price is ₹500, its supply increases to 5000 units.
Thus, we can conclude that as the price falls the supply decreases and as the price rises the supply also increases. Hence, there exists a direct relationship between the price and quantity supplied.
Individual Supply Curve
It is a graphical representation of the individual supply schedule. The X-axis represents the supply and Y-axis represents the price of a commodity. There exists a direct relationship between price and quantity supplied of a commodity.
Market Supply Schedule
It is a summation of the individual supply schedules and depicts the supply of different customers for a commodity in relation to its price. Let us understand it with the help of an example.
|Price per unit of commodity X||Quantity supplied by firm A (QA)||Quantity supplied by firm B (QB)||Market Supply QA + QB|
The above schedule shows the market supply of commodity X. When the price of the commodity is ₹100, firm A supplies 1000 units while the firm B supplies 3000 units.
Thus, the market supply is 4000 units. Similarly, when its price is ₹500, firm A supplies 5000 units while firm B supplies 7000 units. Thus, it’s market demand increases to 12000 units.
Thus, we can conclude that whether it is the individual supply or the market supply, the law of supply governs both of them.
Market Supply Curve
It is a graphical representation of the market supply schedule. The X-axis represents the market supply in units and Y-axis represents the price of a commodity.
Solved Example on Supply Schedule
Question: Enumerate the determinants of supply?
In addition to the price of a commodity, there are also other factors that govern or determine the supply of the commodity. Some of the major determinants of supply are:
- Cost of the factors of production
- Change in technology
- Price of related goods
- Change in the number of companies in the industry
- Taxes and Subsidies
- The goal of a business firm
- Natural Factors