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Definition of Demand
A quantity of goods that a single producer willing to sell over a specific time period depends
on the price of the goods and producers cost of production.
Definition of supply Function
The relationship between supply and its determinants is called supply function.
Demand function: = f (N,T,S,Px, Py , )
Px = Price of x commodities
Py = Price of y commodities
N=natural condition
T=tax
S=subsidy
=Quantity of supply
F=function
Law of Supply
Remaining the other conditions constant when the price of a commodity raises the quantity of
supply also raises again, when price of a commodity falls the quantity of supply also falls.
Supply Schedule
A table which contains the value of prices for a commodity and quantity of supply is called
supply schedule.

Price( )
5 taka
10 taka

Quantity( )
5U
10 U

Date

23/7/2011

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Supply curve
A graph shows the supply for a commodity at different price points is called supply curve.
Y axis
P
S1
10

A
S

D1
5

10

X axis

Figure: Supply curve

Describe that:
We measure, quantity of supply on the x axis and price on the on the y axis. When the price
of a commodity is 5 taka producer sells 5 units of the commodity. When price of the
commodity goods is 10 taka producer sells 10 units of the commodity.by plotting 5 units of
the commodity at price 5 taka we get point A. likewise by plotting 10 units of the commodity
at price 10 taka we get point B.by joining A and B we get a curve SS1.which is known as the
supply curve.

Determinants of supply:
Production cost:
Since, most private companys goal is profit maximization. So higher production cost will
lower profit. Thus hinder supply.
Technology:
Technological improvement help reduce production cost. And increase profit thus stimulates
higher supply.
Number of sellers:
More sellers in the market increase market supply.
Expectation for future price:
If producer expect future price to be higher they will try to hold on to their in inventories and
offer the producer to the buyers in the future. They can capture the higher price.
Market equibrilium:

Date

23/7/2011

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Definition:
Equilibrium refers to the market condition which once achieved tends to persist. In economics
this occurs when the quantity of a commodity demanded in the market per unit of time equals
the quantity of the commodity supplies to the market over the same time.
Geometrically, equibrilium occurs of the intersection of the commodities of the
market demand curve and market supply curve. The price and quantity of which equibrilium
exists are known respectively as the equibrilium price and equibrilium quantity.

S
D1
P1
p
p2

S1

We measure, quantity on the X axis and price on the Y axis.DD1 is demand curve and SS1 is
supply curve. If the market price is p1, since quantity of supply is greater than quantity of
demand. There is excess quantity supplied in the market. the market not clear. Market is in
surplus. The price will drop because of this surplus.
If the market price is p2 since quantity of demand is greater than quantity of supply. There is
excess quantity demanded in the market. the market is not clear .market is in shortage.
The price will rise due to this shortage.
When price is p market is in equibrilium because quantity supplied is equals to
quantity demanded. the market is clear.
There OM is equibrilium quantity and OP is equibrilium price.

Date

23/7/2011

Date

23/7/2011