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Supply
P2
Price P1
0 Q1 Q2 Quantity
Assumptions of the Law of the Supply
1. The number of firms in the market remains the
same.
2. The speed of production do not change.
3. Market prices of related goods remains
constant over a period of time.
4. Cost of Production does not change.
5. Climatic conditions, taste and preferences of
consumers remains constant.
6. No. other inputs are available in the market.
Assumptions of the Law of the Supply
Factors Determining
Cost of Supply
Production Technology
Natural
Govt Policy & Future
Factors
Action Expectations
Factors affecting supply…..
∆Qd P
= *
∆P Qd
Where
∆P = Change in Price
Types of Elasticity of Supply
Perfectly elastic
demand curve
0
Quantity
Perfectly Inelastic Demand Curve
Perfectly inelastic
demand curve
Price
0
Quantity
3.
P Unitary elastic supply
a
20
b
8
D
O 40 100 Q
fig
4. Relatively more elastic supply
P1
Price
M M1
Quantity Supplies
5. Relatively less elastic supply
S
Y
P1
Price
S
O M1 M X
Quantity of supplies
Thank you