There is an inter-relation between a commodity price and supply. Any changes in prices cause the result of extension or contraction of supply. If price increases, there is extension of supply. If price decreases, there is contraction of supply. There is a law of supply which shows the relationship between price and quantity of a particular product supply. Demand and supply are depended on price. If the price matches to quantity demand and quantity supply that means it is equilibrium price. That quantity which is bought and sold at the equilibrium price is called equilibrium quantity. There are basic concepts of supply, law of supply and equilibrium detail.
Supply is related to various quantities of goods, which a seller has wish and able to sell at a different price in a given market at a particular time, other things remaining constant. So, supply is related to amount or quantities which are not coming to market for sale and not the stock in a go-down.
The supply schedule: It shows the schedule of goods and services at different prices. There is an example of supply schedule for Rice.
Now, we can draw a supply schedule curve on the basis of Supply schedule of Rice. Here X-axis shows quantity supply and Y-axis show price. Here, price increases as supply of quantity increases.
Law of Supply:
It shows the relationship between price and quantity supplied of a particular product. It is known as positive relation when price increases the quantity supply, supply will also increase. We can assume price changes if other things are constant as:
Shift in Supply:
Supply curve changes in quantity supply if there is any factor other than price. It happens when, the supply curve shifts entirely right or left.
Factors affecting supply:
There are many factors which affect supply like – change in the cost of production, state of technology, political uncertainty and natural factors.
So, all these are law of supply and demand which describes the equilibrium of demand and supply. There are price factors, quantity factors and many other factors which affect all these circles.