Revision: Supply Analysis Eco HSC Commerce (English Medium) 12th Standard Board Exam Maharashtra State Board

Supply means the quantity of a commodity offered for sale at a particular price, during a given period of time by the producer.

The term ‘supply’ refers to the quantity of a good that a firm is willing to supply at a particular price during a period of time.

"The law of supply states that the higher the price, the greater the quantity supplied or the lower the price, the smaller the quantity supplied." – Dooley

"Fixed costs are costs which do not change with change in the quantity of output." — Anatol Murad

"Variable cost is that part of total cost which varies directly with output." — McConnell

"Total cost of production is the sum of all expenditure incurred in producing a given volume of output." — Dooley

S = f (P, I, T, N, G, E, R, F, Tr)

Where:

• P: Price of the commodity

• I: Input prices

• T: Technology

• N: Number of sellers

• G: Government policy

• E: Expectations

• R: Related goods prices

• F: Natural factors

• Tr: Transport/communication

  TC = FC + VC
(TC = Total Cost, FC = Fixed Cost, VC = Variable Cost)

\[MC_n=TC_n-TC_{n-1}\]

Where:

• MC_n: Marginal cost of nth unit
• TC_n: Total cost at n units
• TC_n−1: Total cost at (n-1) units

Or, more generally:

\[MC=\frac{\Delta TC}{\Delta Q}\]

• ΔTC: Change in total cost
• ΔQ: Change in quantity of output (usually 1 unit)

The law of supply states that other factors being equal, the quantity of a good supplied increases with an increase in the price level and decreases with a decrease in the price level of a good.

Law of supply states the direct relationship between price and quantity supplied, keeping other factors constant.

The law of supply states that other factors being equal, the quantity of a good supplied increases with an increase in the price level and decreases with a decrease in the price level of a good.

The supply schedule below shows the positive relationship between price and quantity supplied.

SS is the supply curve sloping upwards. When the price increases from Rs. 5 to Rs. 15, the quantity supplied also increases from 100 units to 300 units.

The law of supply shows a direct relationship between the price of a good and the quantity supplied. As the price rises, the quantity supplied also increases. This scenario is represented by an upward-sloping supply curve. This happens mainly due to two reasons:

1. Profit Motivation: When the price of a product goes up, the chance of earning more profit also increases (assuming other factors remain the same). This encourages producers to supply more of that product.
2. Rising Production Costs: As production increases, the cost of making each additional unit (marginal cost) also rises. So, producers are willing to produce and supply more only if the price is high enough to cover these extra costs. 

“Other things being constant, the higher the price of a commodity, more is the quantity supplied; and lower the price of a commodity, less is the quantity supplied.”

In simple words: When the price rises, supply rises; when the price falls, supply falls.
There is a direct relationship between price and quantity supplied.

Symbolically:

S_x = f (P_x)

Where:

• S = Supply
• x = Commodity
• f = Function
• P = Price of the commodity

• Supply is about "ready to sell", linked to both price and time.
• Supply ≤ Stock.
• Stock is what’s on hand; supply is what’s for sale.​

• Shows price–quantity relationship for a single producer.
• Higher price → higher supply, lower price → lower supply.
• Individual supply curve slopes upward, showing direct relationship.

• Shows total quantity supplied by all producers at different prices.
• Market supply = sum of individual supplies (A + B + C).
• Higher price → higher market supply.
• Market supply curve slopes upward, showing direct relationship.

• Law of supply: The Higher the price, higher the supply; lower price, lower supply (if all else stays the same).
• Exceptions: rare items, short periods, perishable goods, some labor markets.
• Supply is always shown using a schedule (table) and a curve (graph).
• Supply schedule shows price and quantity supplied in tabular form
• Assumes other factors constant
• Types: Individual and Market
• Individual supply schedule shows supply of one producer
• Market supply schedule shows total supply of all producers
• Market supply = sum of individual supplies
• Law of supply: Higher price → higher quantity supplied
• Supply curve is graphical form of supply schedule
• Price on Y-axis, quantity on X-axis
• Supply curve slopes upward
• Types: Individual supply curve and Market supply curve

• Variation in supply occurs due to change in price alone.
• Expansion of supply: Price rises → quantity supplied increases (upward movement on same curve).
• Contraction of supply: Price falls → quantity supplied decreases (downward movement on same curve).

• Change in supply occurs due to factors other than price.
• Increase in supply: Favourable factors → supply curve shifts right.
• Decrease in supply: Unfavourable factors → supply curve shifts left.

• Fixed costs remain constant at any output level.
• Variable costs change as output changes.
• Total cost equals the sum of fixed and variable costs.
• Average fixed cost (AFC) drops as output increases because FC is spread over more units.

• AC = TC/Q, or AC = AFC + AVC.
• AFC always falls with more output; ATC and AVC form U-shaped curves.
• Lowest ATC means most efficient production point.
• The gap between ATC and AVC shrinks as AFC gets smaller.

• Marginal cost = extra cost for one extra unit.
• MC uses only variable costs (not fixed cost).
• MC curve is U-shaped in the short run.
• MC is key for decision making: output is optimal when Marginal Cost = Marginal Revenue.
• Sum of all MCs = Total Variable Cost (TVC).

• Average Revenue (AR) = revenue per unit sold.
• Formula: \[AR=\frac{TR}{TQ}\]
• Example: TR = ₹3000, Quantity = 15 → AR = ₹200.

• Extra revenue from selling one more unit
• MR = Change in Total Revenue
• Formula: MR = TRₙ − TRₙ₋₁
• Example: ₹4200 − ₹4000 = ₹200