class 12 microeconomics Supply and law of supply very important notes

 Supply and law of supply....... short and easy notes for board exam.

1. What do you mean by supply? Difference between supply and stock?
> The supply of goods is that quantity which offered for sale in a given market at a certain time at various price. If the seller is ready to sell at given price and at a given time is called supply.
Following are the difference between supply and stock;
Supply;

• Supply is that quantity in which seller is ready to sell at a given price and at a given time.
• Supply is the part of stock.
• Supply will be lower than stock or equal to stock.

Stock;

• Stock is that country which is available with the seller.
• Stock is whole quantity of the goods.
• Stock is higher than supply or equal to supply.

For perishable goods there is no difference between stock and supply.

2. Write the factors affecting the supply or write the supply function.
> Functional relationship between supply of a commodity and its determining factor is called supply function.
Sx = F (Px, Pr, Pf, T, N, G, Ex, Gp)
Whereas,
Sx= supply of commodity X
Px = price of commodity X
Pr = price of related goods
Pf = price of production factors
T = technique
N = number of firms
G = objective of firms
Ex = expected future price
Gp = government policy

3. What do you mean by law of supply? What are its assumptions? Write its exceptions.
> Producer always want to sale the goods at Higher price at maximum profit. The law of
supply show the relation between price of the goods and its commodity. "Higher the price greater the supply, lower the price smaller the supply". There is a positive relation between supply and price.

Following are its assumptions;

• There is no change in income of buyer and seller.There is no change in the price of substitute goods.
• Price of production factor remains constant.
• Technological level remain constant.
• Government policy should remain constant.
• There is no change in the taste, habits and fashion of buyer and seller.

Following are its exceptions;

• Law of supply doesn't apply strictly to agriculture product.
• The law of supply is not operative in perishable goods.
• The law of supply fail in goods having special distinction.

4. Write the cause of increase in supply.
> Following are the causes of increase in supply;

• Improvement in technology.
• Reduction in price of factors of production.
• When price of substitute goods decreases.
• Change in goal of producer.
• Increase in number of firms.
• Reduction in taxes.
• Expected price fall in future.
• Increased in subsidy.

5. Write the causes of decrease in supply.
> Following are the main causes of decrease in supply;

• High cost of production.
• Factor of production cost increases.
• Increase in price of substitute goods.
• Expected price rise in near future.
• Change in goal of the firm.

POINTS;

• Supply is associated with time and price.
• Supply is lower than stock at lower price.
• There is a positive relation between price and supply.
• For normal goods, supply curve is upward sloping.
• Contraction in supply means, less supply at lower price.
• Stock refer to that quantity which is available with the seller for sale
• S = F (P)

THE END