CHAPTER 2

DEMAND
ANALYSIS
SUPPLY
 The term supply refers to the quantities that a seller
is willing and able to sell at different prices during a
given period of time.
SUPPLY SCHEDULE
 A supply schedule shows the various quantities of a
commodity offered for sale at different prices.

 It shows a direct relationship between the quantity

and price
Price per litre of milk (Rs.) Quantity Supplied (in litres)
1 2
2 4
3 6
4 8
5 10
SUPPLY CURVE
 Upward sloping curve
 Positive slope

 Direct relationship between price & quantity

demanded

S
PRICE

QUANTITY SUPPLIED
LAW OF SUPPLY

“Other things being equal as a price of the commodity

Rises its supply is extended and as the price fall if
supply is contracted.”
EXCEPTIONS TO SUPPLY CURVE
 Labour supply
EXCEPTIONS TO SUPPLY CURVE
 Saving: Supply of Capital:

 Expectations of a Change in Price in the Immediate

Future

 Immediate Need of Cash

 Rare Collection

 Closure of Business
EQUILIBRIUM PRICE DETERMINATION
 The equilibrium price in the market is determined by
the point where demand and supply are in balance.

 At this point the quantity demanded by the consumer

is equal to the quantity supplied by the producer.
EQUILIBRIUM PRICE DETERMINATION

Price Per Qty. Qty. Market Price

Litre of Milk Demanded Supplied (in Status Changes
(in Rs.) (in Litres) Litres)

5 8 16 Surplus Decline

4 10 14 Surplus Decline

3 12 6 Equilibrium Balance

2 14 6 Deficit Increase

1 18 2 Deficit Increase
EQUILIBRIUM PRICE DETERMINATION