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What Is Supply? Essay

1887 words - 8 pages

What Is Supply?
â–  Supply of a commodity refers to the various quantities of the the commodity which a seller is willing and able to sell at different prices in a given market, at a point of time.
â–  Supply is related to scarcity. Its only the scarce goods which have a supply price; Goods which are freely available have no supply price.
The Determinants of Supply
â–  Price of good : since higher money income is necessary to induce producers to produce more, the amount supplied therefore increases when producers get a higher price for their product.
â–  Prices of other goods: change in prices of other goods in the market also has influence on the supply of a commodity. ...view middle of the document...

5.Expected change in price:-In case producer expect an increase in the price ,they will try to withdraw goods from the market.Consequently,supply will reduce .If price is expected to fall in the market ,supply will naturally increase.
6.Natural factors :- Supply of good is a part of good produce.It mean that more production of good will result its more supply and vice ' versa..Agricultural production depends upon the natural factors such as rain,fertility,climatic condition etc. production may be adversely affected by drought and heavy rains and flood etc.
7.Means of transportation and communication:-Adequate supply of commodities is maintained If the means of transportation and communication are developed.Scarcity of good will be less in the domestic market,if the mean of the transportation and communication are properly developed.

8.Taxation policy:-The production of commodity is discouraged ,if heavy duty in on its products is imposed .In the same way tax concession encourage producer to increase supply.
9.Agreement among producer:-Sometime all the firms producing the same commodity forms an association, pool or a syndicate and regular supply of the goal in such way ,so that they may get maximum profit

Law of supply
Law of Supply says, supply of the commodity will increase with increase in price and decrease with decrease in price, other things remaining the same. In other words, price of any commodity is directly related with the quantity supplied .
According to Dooley, ”the law of supply states that other things remaining the same , higher the price, the greater the quantity supplied or lower the price, the smallest the quantity supplied”.
When we are talking of supply, we are bound to view with the eyes of producers , not the consumers ,because it’s producers who are the suppliers.
It is quite natural that in case of increase in prices producers will like to multiply their profit. For this they will be required to sell more quantity of goods and thus the supply of goods will increase. Higher price in this way induces the sellers to increase the supply of goods. On the other hand, low prices reduces the margin of profit so the producer reduces the supply.
RESERVED PRICE
The price cannot fall below a certain point .In case the price falls too much the supply of the product may be stopped .The price below which the producer will not be willing to sell is “reserved price”.
The amount of reserved price depends upon :->
1.Durability of commodity
2.Estimated price
3.Storage charges
4.Transportation charges etc
Assumptions
1.There is no change in price of related commodities
2.There is no change in technique of production.
3.There is no change in price of factors of production.
4.There is no change in goal of firm.
5.There is no expectation of change in the price of the
commodity.
PRESENTATION OF LAW THROUGH SUPPLY SCHEDULE
â–  Gives a full account of supply of a particular commodity
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