F

the
we
both
2.18
and able to offer for sales at a certain price. It is a flow concent o willing
total
Supply
Supply
mean
THE .
willingness
the
is
volume
should
market for saleother
at a short notice and supPply is the
CONCEPT
quantity
be
of
and quantity which is
actually brought in thea market. For fish, vegetables, fruits which are
side
called perishable commodities, supply and stock
carefully
of
ability are the same
because whatever is in stockOF
ofa
a must be disposed of. The commodities
which are nonperishable commodity
can betoheld back if
prices are not favourable.
If the prices are high, larger quantities
market are offered or
SUPPLY
commodity
supply
sellers or producers from the stock.
supplied by the
distinguished
On the other hand, if the
are low, which prices
onlysmall for
quantities are supplied for sale.
Like demand, AND
are
supply function expresses a
that
can
the relationship be-
tween quantity of the its
commodity
and its determinants. In
that producerfromis
willing to supply
be SUPPL
a
symbolic form supply
commodity.
function
producers can be
written as essential
stock.
S, =
S [P, P, P, C, T, G, F] brought
Where S, is quantity of commodity Stock
are
X By
FUNCTIO
P stands for a vector of supplied, P,
wi
isfeatures
its
pri
into
prices of substitute goods, Pc supply
vector of
prices of complementary represen
means
the
factors of
production goods, Fj representS pi of
(J I to K)).C is the total
=
or the
producer, T represents the state expenditure
of technology, and G is the
the
producers. S denotes Bo
relationship is functional shape of relationship.
supply function. Like
complex relationship Some function, 1it ison
demand function, a

factors may
.

have
positive effect
positive
 Theory of Consumer's Behaviour And Demand Analysis 89

itv
qua
supplied while others negative. Supply function may be
linear function or non linear function. In order to find the effect of
each on will
factor on
each factor
illingness to supply, we simplify the procedure by
keeping the other factors unchanged and varying just one at a time.

2.19 LAW OF SUPPLY

The law of supply relates to the functional relationship between
nrice of a commodity and its supply. In contrast to the change in
pric
auantity demanded in response to the changes in price, the quantity
supplied generally varies directly with price keeping other factors
constant. That is, the higher the price, the larger is the quantity
supplied and the lower the price, the lower is the quantity supplied.
This is the low of supply. From a supply schedule we can draw a
supply curve for an individual producer. In Table 2 (f), it is seen
that when the price of rice is Rs 100 per quintal, the 100 quintals
of rice are supplied by the producer in the market. When price rises
toRs 110 per quintal, 150 quintals are supplied. When price goes
to Rs 150 per quintal, quantity supplied of rice has risen to 250
intals. By plotting the above supply schedule of rice we have
btained supply curve SS as shown in Figure 2.19 (A). In the
gure the quantity supplied has been measured along X-axis and
heprice of rice has been measured along Y-axis. It is found from
e figure that supply curve slopes upward from left to right, which
dicates that as the price of rice rises, quantity supplied increases
d vice-versa. This is a direct or positive relationship between
ice and quantity supplied.
Table 2(f: Supply Schedule of Rice
Rice per Quintal Quantity Supplied
(Rs)
100 100
110 150
120 190
130 220
150 250
 90 Engineering Economics

Price
Y

S
150

140

130

120

110-

100
S

50 100 150 200

Quantity
250 X

Figure 2.19A) Supply Curve

2.20 MARKET SUPPLY
Market supply is the horizontal summation of
individual producers. That is, at a given price of thesupply curves for
market supply is the sum of quantities commodity, the
producers. If we assume
individual producer
supplied by individual
and each of them as
individual
supplies
will be the horizontal S,. S. S,. .Sthen market firms
It can be writeen as S summation of supply of the individual
supply
firms.
then S ns wheren is=S, +S, +S, +...+S. If firms are
=
the number identical
depends on factors like price of theof firms. The market supply
commodities, nature of technology, commodity, price of other
supply curve for goalsof the
producers, like the
an individual producer.
The supply curves of firms
shown Figure 2.20 (A). At (producers) 1,2, and 3 have been
in
p, price the above firms
oy,+oz. So market supply (S) supply ox,
equals
price. Likewise, at P, price the market to
ox, +
oy, 0z, at P
+

ov. +0z, Making such supply (S) is equal to ox, +

addition at different
prices, we can
 Theory of Consumer's Bchaviour And Demand Analysis 91

Price Price Price

S S

y y,Quantity O Z Z,Quantty
X x,Quantity
(1) (2) (3)
Figure 2.20 (A) Supply Curves of Individual Firms
Price
S

P2
P

X Y Quantity

Figure 2.20 (B) Market Supply Curve

been shown in
finally draw the market supply curve SS which has
the summation
Figure 2.20 (B). In the Figure, it is clear that OX is
of ox, oy, and oz, at P, price and OY is the summation of ox,, oy,
and oz, at P, price. Therefore SS curve represents the market
,

supply curve.

2.21 THE ELASTICITY OF SUPPLY

of
Just like the demand elasticities, we have the concept
elasticity of supply. Price elasticity of supply measures the respon-
SIveness of quantity supplied when price of a commodity undergoes
to change. That is :
 92 Engineering Economics

e,
Percentage changeis quantitysupplied
Percentage change is price

(O 100
AQs P
es=
AP100 AP Qs

or es dQs P
dP Qs
Where Q =Quantity supplied, P =Price
Elasticity of supply varies from O to o. f e, 0,
effect of price changes on there is no
=

be a vertical line
quantity supplied. The supply curve wil
parallel price axis as shown by S, in Fig 2.21
to
(A). If e, oo, it is the case of
=

perfectly elastic supply. It will be

a
parallel line to the quantity axis as shown
by S, in the Figure.
When e<l, it is the case of
inelastic supply and when
be the case of elastic e> 1, it will
the
supply represented by S, and S, lines in
as
Figure. On the other hand, when e 1, then it will be the
=

of case
unitary elastic supply. The unitary elastic
through the origin as shown by S, line in the supply 2.21 passes
curve
Price Figure (A)

S, (Perfectly Inelastic Supply)

S, (Inelastic Supply)
S, (Unitary Elastic Supply)
S. (Elastic Supply)

S, (Perfectly Elastic Supply)

Quantity
M
Figure 2.21 (A) Various Types of Supply Curves
25019hni lom
Just like demand elasticity, supply elasticity is also a useful
concept for practical purposes. We can study some aspects of
 Theory of Consumer's Behaviour And Demand Analysis 93

producers' behaviour in the market, the effect of technological

changes, the incidence of taxation etc. with the help of this concept.