LAW OF SUPPLY

 LAW OF SUPPLY

The Law of supply is a fundamental principle of economics. The Law of supply is given by Alfred Marshall in his book ‘Principle of economics’ in the year 1890. Law explains the functional relationship between price and supply.

Statement of the law:

Other things being constant, the higher the price of the commodity, the more the quantity supplied, and the lower the price of the commodity less is the quantity supplied.

 In simple words the higher price of a commodity producer will sell more and at less price producer will sell less.

 Symbolically,

                      Sx=f(Px)

The Law of supply is subjected to various assumptions:

1)  The cost of production is constant.

2)  No change in weather conditions.

3)  No change in government policies.

4) No change in transport constant.

5)  Prices of other goods are constant.

6)  No future expectations.

 

Supply schedule:

price	Quantity supplied
10	100
20	200
30	300
40	400

The supply schedule explains the direct and functional relationship between price and supply.

Diagram:

      

Explanation:

1) X-axis represents the quantity of goods supplied.

2) Y axis repreesnts price of quantity.

3) As price of quantity raises from 100 to 200 and so on, producers are willing to supply more quantity of commodities.

4) SS is a supply curve that slopes upwards from left to right.

5) Therefore diagram shows a direct relationship between price and quantity supplied.