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Supply is one of the forces that determine the price in the market. Supply of a commodity
refers to the quantity of a product which a seller is willing and able to sell at a given price
per unit of time. In words of Anatol Mirad, The quantity supplied is defined as the quantity
of a commodity offered for sale at a given price in a given market at a given time. Supply
may also be defined as that part of stock that the seller offers for sale at a given price and
at a given time. Thus, supply means the quantity of a commodity offered for sales at a
particular price during a given period of time.
(ii) Perfectly inelastic supply: When a change in price does not lead to any change
in quantity supplied, supply is said to be perfectly inelastic. The supply curve is a straight
line perpendicular to the x-axis shown in Fig. 3.2 (ii) ss is the perfectly inelastic supply
curve.
S
Y
Price
X
O S
Quantity of Supply
Prof. Marshall suggested a mathematical method for measuring elasticity of supply. The
formula for this method is given as follows:
Percentage change in supply
Elasticity of supply (Es) =
Percentage change in price
Change in supply
100
Original supply
Es =
Change in price
100
Original price
Change in supply Original price
Es =
Original supply Change in price
Q P
Es =
Q P
Q P
Es =
P Q
Q. 1. When price of a plastic toy is Rs. 2, its supply is 1000. But when price rises to
Rs. 3 per unit, supply of plastic toys also goes upto 2000 units. Calculate the Elasticity of
Supply.
Solution: P = Rs. 3 Rs. 2
P = Rs. 1
Q = 2000 units 1000 units
= 1000 units
P = 2
Q = 1000
Q P
Elasticity of Supply (Es) =
P Q
1000 2
= =2
1 1000
E = 2
Elasticity of Supply = 2. Ans.
Q P dq p
Es = =
P Q dp q
dq p
Es =
dp q
2
= 8
13
16
Es = .
13
16
Elasticity of supply is equal to . Ans.
13
BASIC CONCEPT OF SUPPLY 19
6 B
Indifference Table
4 C
Combination Apples Bananas D
2
A 1 10
X
O 1 2 3 4
B 2 6 Apples
D 4 2
Apples
has than IC1. IC4
IC3
3.7.1 Income Effect: IC 2
IC
A change in quantity demanded as a result of 1
EXERCISE
1. Define elasticity of supply and examine its significance in the theory of supply.
2. What is law of supply ? Explain it with the help of supply schedule.
3. Briefly explain: Price effect, Income effect and Substitution effect.
GGG