Theory of Supply — Part 1: Supply, its Determinants and the Law of Supply: visual lesson, ISC Class 12 Economics

Lesson

Theory of Supply and Elasticity of Supply

Part 1 — what supply means, how it differs from stock, what determines it, and the law of supply.

In this lesson you will

Distinguish stock from supply for perishable and durable goods
Write the supply function and explain the determinants of supply
State the law of supply, derive market supply and explain its exceptions

Part 1 at a glance

Concept

What supply means

Supply is the quantity of a good that sellers are willing and able to offer for sale at a given price during a given period.

It is a flow: a quantity per day, week or month at a stated price.

Supply needs a price and a period

Compare

Stock and supply

Stock is the total quantity a seller holds at a point of time.

Supply is the part of the stock offered for sale at a price.

For perishables (fish, flowers), supply is close to stock. For durables (furniture, steel), sellers can hold back stock when they expect better prices.

Supply can equal stock but never exceed it in the short period.
	Stock	Supply at today's price	Why
Kochi fisherman (imagined)	500 kg	500 kg	Perishable: must sell almost all today
Saharanpur woodcraft dealer (imagined)	300 boxes	120 boxes	Durable: holds back 180 for a better price

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