Law of Supply:

The principle that there is a direct relationship between the price of a

good and the quantity sellers are willing to offer for sale in defined time
period (If other things remains constant).
Supply schedule:
The schedule which shows the specific quantity of goods or services that
people are willing and able to offer for sale at different prices is called
Supply Schedule.
Price(Rice/kg)
10
20
Explanation:

Quantity Supplied(Rice/kg)
50
100

This table shows that when price increase from R.s 10 to R.s 20, supply
increases from 50 kg to 100 kg on the other hand when the price
decreases from 20 R.s to 10 R.s its supply decreases form 100 kg to 50
kg. This shows that supply cure has positive slope.
Graph:
P
D

20

10

a
s
50

100

Qs

Explanation:
In this graph individual supply in kg on X-axis and price in Rs. On Yaxis. Point a and b shows the quantities of supplied 50 and 100 at prices
Rs. 10 and 20 respectively. By joining these points supply curve S S has
been drawn.
Assumptions:
Cost of production should not change.
Production technique should not change.
Taxes and subsidies should not change.
Expectation of consumer.
Number of sellers in the market.
Price of other good the firm could produce.
Natural resource of the country should not change.
Market supply and demand:
A market exists where interaction amongst buyers and sellers determines
the price and quantity of goods and services exchanged. This is
sometime called the price system.
Market Equilibrium:
The point at which the quantity demanded and quantity supplied is equal
at any price is called market equilibrium.
Table:
Price of ghee per kg
Rs. 4
Rs. 8
Rs. 12
Rs. 16

demand of ghee kgs

500
400
300
200

Supply of ghee kgs

100
200
300
400

Explanation:
In this table, at the price of Rs. 4 per kg demand is 500 kgs and supply is
100 kgs because the price is low. With the rise in price, the demand falls
while supply expands. When the price is Rs. 12 per kg demand and
supply becomes equal. After this further increase in price results in
increasing supply than demand. So, Rs. 12 is the price on which demand
and supply are equal (300kgs) or there is equilibrium in demand and
supply. So this price is determined in the market.
Graph:
P
D

12

E
S
D
Q
300
Supply and demand in kgs

Explanation:
In this diagram, supply and demand are measured on X-axis and price
is measured on Y-axis. According to the table, demand curve DD has
been drawn joining the points of price and demand. The curve DD
slopes downward from the left to the right. Supply curve SS has been
drawn joining the points of price and supply. The curve SS slopes
upward from the left to the right. Both the curves (DD, SS) cross each
other at point E. It means demand and supply are equal at this point. So

this is the equilibrium point. By drawing a perpendicular from this point

on X-axis, equilibrium quantity, demand and supply of ghee is founded
which OQ or 300 kgs and the equilibrium price is founded by drawing a
perpendicular from point E on Y-axis Which is OP or Rs. 12 per kg.

Elasticity of Demand:
Elasticity of demand is the degree of responsiveness of a commodity to
a change in its price.
Point elasticity of Demand:
If there is very small change in demand as a result of a very small
change in price, this type of change in demand is called point elasticity.
Formula of Point Elasticity:
Ed=

Ed=

Qd
P

Q 2Q 1
Q1
P 2P 1
P1

Midpoint Formula:

Ed=

Q 2Q 1
Q 1+ Q2/ 2
P 2P 1
P 1+ P 2
2