Law Of SUPPLY

Question 1

Statement of law

Answer 1

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

Question 2

Assumptions to the law

Answer 2

Constant cost of production
Constant technique of production
No change in weather conditions
No change in govt policy
No change in transport cost(better transport facility will increase supply at the same price)
Price of other goods remain Constant (For instance, if the price of another good rises significantly, producers might reduce the supply of the original good and allocate resources to produce the more profitable one. This shift can cause the supply of the original good to decrease, even if its price increases, thus disrupting the law of supply.)
No future expectations

Question 3

Exceptions to the law of supply

Answer 3

Supply of labour
Agricultural goods
Urgent need for cash
Perishable goods
Rare goods

Question 4

Exceptions to the law of supply

Answer 4

Supply of labour
Agricultural goods
Urgent need for cash
Perishable goods
Rare goods

Question 5

DETERMINANTS OF SUPPLY

Answer 5

1. Price of commodity (P^ S^)
2. State of technology
   (Technological improvements ^ cost of production less , production ^ supply^)
3. Cost of production(depends on factor price)
4. Govt policies (favorable policy supply ^ unfavorable policy supply less) depends upon the policy measures
5. Infrastrucual facility ( Eg transport, communication, power)( good facilities supply^ and vice-versa)
6. future expectations about price(if the price is expected to rise in the future, the producer may withhold the stock,which will lead to decrease in present supply)
7. Natural conditions( agricultural products ka supply depends on natural conditions) ( good climate harvest^ supply ^ and vice versa)
   8.others
   a) price of other goods
   b)exports and imports
   c) industrial relations

Question 6

Supply of labour

Answer 6

means total number hours of work a labour does at a given wage rate
○ represented graphically by a supply curve
○ wage rate^^ supply of labour^^
○ supply curve slopes upwards
○ wage rate^^ supply of labour decreases
○ worker prefers leisure to work
○ it is a backward bending supply curve