Law of supply states that all factors being constant, seller supply more in the rising price and supply less when the price decreases.
Definition
Other things remaining unchanged, the supply of a commodity rises i.e., expands with a rise in its price and falls i.e., contracts with a fall in its price.
Assumption for the law
1. No change in income
2. No change in technique of production
3. No change in transport cost
4. The price of other goods remain constant
5. No change in government policies
6. No speculation about future changes in the price of the product
7. Fixed scale of production
Explanation of the Law
Below we have explained the Law of supply explained with the help of supply schedule and supply curve.
Supply schedule
Supply schedule is the tabular representation of price and quantity supplied by the seller.
When the price was Rs 10, quantity supplied was 1kg. When the price started 3ising from Rs 20 to 50 to 40 so on, the quantity supplied by the seller increased from 2kg, 3 kg to 5kg respectively.
Thus the above table shows positive relation between price and quantity.
Supply curve
The supply curve is a graphical representation of a supply schedule.
In the above figure, OX axis shows quantity of demand and OY axis shows price. When the price was at OP, supplier was supplying OQ quantity. When the price increases from OP to OP2 and then supply also increases from OQ to OQ2. Similarly, if price decreases from OP to OP1, then supply also decreases from OQ to OQ1.
In the above figure, we can see supply curve is sloping upward. The market supply rises with the rise in price.
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