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Question
Give reason or explain the following.
Supply is directly related to price.
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Solution 1
Supply is directly related to price.
Meaning: -The law of supply establishes a functional relationship between the price of a commodity and its quantity supplied in the market.
Definition: -According to Marshall the law of supply is defined as” Other thing being equal, the quantity of a commodity supplied is directly related to its price”
In other words, more quantity of a commodity is offered for sale at a higher price and less quantity is offered for sale at a lower price. So supply of a commodity is directly related to its price.
Symbolically it can be stated as follows:
Sx = f (Px)
Where, S stands for supply, f stands for function of, P stands for Price, x stands for a given commodity.
Solution 2
Other things remaining constant, the quantity supplied of a commodity is positively related to the price of the commodity. Higher prices implies higher profitability for the producers. Thus, at higher prices producers prefer to supply greater quantities of the commodity.
