Supply function
Supply refers to the amount of goods offered by the seller for sale at a given price, at a
given point of time. Supply of a good is different from the stock. Stock is the volume of a
commodity possessed by the seller. The seller will not bring the entire quantity of his stock
at a given price. The seller offers only a part of his stock at a particular time, at a given
price. So, supply means, the quantity which is actually brought in market.
Definition: - Harvery defines, “Supply in Economics refers to how much of a good will be
offered for sale at given price”.
In case of perishable goods, supply and stock are the same-because perishable goods like fish,
milk, vegetables, leafy vegetables etc. cannot be stored and immediately spoiled. In case of non-
perishable goods, supply and stock are not the same. Because non-perishable goods, can be
stored for a long time and are offered by the sellers when their prices are high. If the prices are
low then only small quantities are supplied for sale.
Determinates of quantity supply of a good
Supply of a commodity depends not only on its price but also on several factors those
factors areas follows
1. Number of sellers: - The supply depends on the number of sellers Entry of more sellers
willincrease the supply and the exit of them will decrease the supply.
2. Transport and communication: - Improvement in the means of transport and
communications will increase the supply. If there is lack of better transport facilities, supply
will be reduced.
3. Prices of related goods: - The supply of a good depends not only on its price but also
on the prices of other goods. If the prices of related goods rise, supply of the product
decreases and if the prices of related goods fall, the supply of the product increases.
4. Natural factors: - As regards agricultural products, better rain fall, improved seeds,
fertilizers etc increases supply. On the contrary failure of rains, floods, pests will decrease
the supply.
5. Cost of production: - The cost of production of a commodity rises due to the rise in
the pricesof factors of production and hence the supply will be reduced. If the prices of
factors of production falls, the supply of a good increases.
6. Techniques of production: - Improved techniques of production will lower the cost of
production and increases the supply of the product.
7. Strikes: - Strikes in the industries and lockouts of the firm’s results in the decrease of
supply.
8. Supply is always at a price: - If the price of a good falls, supply of that good falls and
if the price rises, supply of that good increases.
9. Goals of the firms: - The supply of goods is also determined by the goals set by the
producing firms. If the firm decides to produce more, supply increases and if they decide
to produce less or stop the production of the product, supply will be reduced.
10. Taxation: - Taxation of output, sales etc also affects the supply. More taxes on output
will decrease the supply and vice versa.
Supply Function
The supply of a commodity depends on various factors viz.., on its own price, number of
sellers, transport facilities, prices of related goods, natural factors, cost of production,
taxation, prices of raw materials etc. If any of these factors change, quantity supplied of
the commodity changes. Supply function explains this functional relationship between the
quantity supplied of the commodity and the factors influencing its quantity supplied.
The supply function of a commodity can be expressed as –
Sx = f (Px, Pr, C, T, R, N, M. ......... ∞)
Where,
Sx = Supply of good ‘x’, f= Function of (depends on)
Px= Price of good ‘x’ Pr = Prices of related goods,
C = Cost of production T= Taxation
R= Prices of raw materials N = Natural factors
M = Number of sellers ∞ = Other factors