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SCHEDULE AND
DIAGRAM
SUPPLY
Definition
Basis of Supply.
BASIS OF SUPPLY
Reservation Price
Cost of Production.
Nature of Product.
Need for money.
Expectation regarding future price.
Time required for varying supply.
Holding Capacity.
Warehousing Costs/Facilities.
DETERMINANTS OF SUPPLY
1. TECHNOLOGY.
The Way commodity is Produced.
Pinput α 1/S
DETERMINANTS OF SUPPLY
1. GOVT. TAXES & SUBSIDIES.
Levy taxes on commodities includes
Excise, Customs duty, Sales tax etc.
Indirect Taxes α Supply
QαP
THE SUPPLY SCHEDULE.
Changes in supply to Quantity Price
changes in price. Supplied (Rs/Kg)
Ex: Supply of (Kg/day)
Mangoes in a local 100 6
market.
120 7
140 8
160 9
180 10
THE SUPPLY CURVE
10
8
Price (Rs/Kg)
0
100 120 140 160 180
10
8
6
4
2
0
400 800 1100 1300 1400
Supply (Kgs)
INDIVIDUAL & MARKET SUPPLY
Price Market Supply (Quintals)
(Rs.) A B C D Total
400 4 3 5 6 18
600 8 6 9 10 33
800 11 8 12 15 46
1000 13 10 15 20 58
1200 14 11 20 30 75
INDIVIDUAL & MARKET SUPPLY
CURVE
1400
1200
1000 A
B
800
Price
C
600
D
400 Md
200
0
0 20 40 60 80
Quantity
LIMITATION OF LAW
Prices of other Products are Constant.
P
(Rs/Kg)
Attainable region S
8
7
Non-Attainable
P1
Disequilibrium
Equilibrium pt.
Excess Supply Q2-Q1
Excess Demand Q2-Q1
P1
Q1 Q2
INCREASE OF SUPPLY
Price Supply Supply
1 2 700
(Rs)
(Qtl.) (Qtl.) 600
500
Price
S2
200
500
200 300 150 400 S1
Price
300 S2
100
400 450 300 0
0 100 200 300 400 500 600
S ↓ => P ↑, Q ↓
• Decrease of supply gets D
buyers to buy less of the
Q1 Q0 Q
good by raising the price.