04-25-2015, 10:07 AM
[ltr]Concept of supply
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[ltr]Supply means the amount of a commodity that firms are able and willing to offer for sale in the market in a given period and at a given price.[/ltr]
[ltr] The supply curve presupposes competition among firms so that no one firm can set and influence price. Firms are small relative to the market, and are price takers. Each small firm would provide a quantity of output for each possible price. Combining each firm’s quantity of output at each price for all firms provides a market supply relationship and thus a supply curve. [/ltr]
[ltr]Law of Supply
The law of supply states that, other things remaining the same, the quantity of a commodity supplied varies directly with its price i.e. rises when the prices rise and falls when prices fall.
[ltr]In the short run it is not possible to increase supply easily but in the long run supply can be increased easily.[/ltr]
In contrast, to demand, the supply relationship shows a direct relationship between price and the quantity supplied. High prices encourage firms to produce more, while low prices discourage production. At high prices more resources can be used in production, and more firms with higher costs can find it profitable to produce. The reverse is true for low prices. This direct positive relationship between price and quantity supplied is called the law of supply
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[/ltr]
[ltr]Supply means the amount of a commodity that firms are able and willing to offer for sale in the market in a given period and at a given price.[/ltr]
[ltr] The supply curve presupposes competition among firms so that no one firm can set and influence price. Firms are small relative to the market, and are price takers. Each small firm would provide a quantity of output for each possible price. Combining each firm’s quantity of output at each price for all firms provides a market supply relationship and thus a supply curve. [/ltr]
[ltr]Law of Supply
The law of supply states that, other things remaining the same, the quantity of a commodity supplied varies directly with its price i.e. rises when the prices rise and falls when prices fall.
[ltr]In the short run it is not possible to increase supply easily but in the long run supply can be increased easily.[/ltr]
In contrast, to demand, the supply relationship shows a direct relationship between price and the quantity supplied. High prices encourage firms to produce more, while low prices discourage production. At high prices more resources can be used in production, and more firms with higher costs can find it profitable to produce. The reverse is true for low prices. This direct positive relationship between price and quantity supplied is called the law of supply
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