Theory of Supply. Supply refers to quantity of goods and services that producers are willing and able to offer at market at various prices during a given period of time. For perishable goods whatever is produced must be sold i.e; supply=stock. For non-perishable goods supply and stock are different. Supply refers to what a firm offered for sale in the market not necessarily mean for what they succeed in selling. Supply is flow concept. Determinants of Supply Price of the product Price of related good. State of Technology. Government policies (Taxes). Time. Nature of computation and size of industry. Floods, market structure, war, labour strikes, communal riots. Law of supply It explains Direct relation between price and supply. Quantity of goods produced and offered for sale increase as the price increases and decrease as the price decreases. Supply curve Exceptions to Law of supply . 1) Rare commodity 2) Land 3) Supply of labour. Expansion and contraction of supply. When the supp...
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