RBSE Class 12 Economics Notes Chapter 5 Concept of Supply

Rajasthan Board RBSE Class 12 Economics Notes Chapter 5 Concept of Supply

Supply of a commodity implies that quantity of the commodity which a seller is ready to sell in a definite time period, at a certain price.

The extension and contraction of supply is the movement (shifting) of the same curve on points above and below it.

Changes in supply curve occur when a change in supply takes place due to other reasons except price.

In economics, stock and supply are used in different meanings.

Stock implies the total quantity of produced goods, while supply is that part of stock which a producer is prepared and eager to sell.

The supply of commodity is influenced by many factors, like – price of commodity, cost of commodity, prices of related goods, technique, quality of inputs, special occasions, transportation cost and government policy.

According to the law of supply, other things remaining the same, the supply increases upon rise in price, of commodity, and supply decreases when price decreases.

RBSE Class 12 Economics Notes Chapter 5 Concept of Supply Notes

There is a positive relationship between supply and price.

As with law of demand, the law of supply also has certain assumptions.

The assumptions of the law of supply are – the costs of means of production and supply should remain constant, there should not be any development in production technique, no change should occur in the interests of the seller and buyer, the supply of commodity should be divisible, prices of related commodities should remain constant, there should be no change in taxation and estimation by the government, etc.

The activeness of law of supply is because of these reasons – firms try to earn profits by selling more quantity of commodity at high prices, arrival of new products at high prices, the supply of all means of production is convertible in long term.

Supply schedule is of two kinds – individual supply schedule, and market supply schedule.

Individual supply schedule shows the supply of a firm at various prices.

Market supply schedule shows the combined supply of all the firms.

As with schedules, the supply curves are also of two kinds – individual supply curve, and market supply curve.

RBSE Class 12 Economics Notes Chapter 5 Concept of Supply Notes

Important Glossary

  1. Supply : Demand refers to various kind of goods that will be purchased at various prices, similarly supply refers to the schedule of the quantities of a good that will be offered for sale at various prices during a period of time.
  2. Stock : It is that quantity of commodity which is produced by the producer.
  3. Sources of Production : There are five sources of production which are land, labour, capital, organisation and technique.
  4. Transport Cost : The cost of transporting goods from one place to another.
  5. Individual Supply Schedule : Individual supply indicates the schedule telling different quantities of an item that a producer is ready to sell at different levels of value during a certain period.
  6. Market Supply Schedule : The market supply schedule shows the different quantities of an item, which all the producers want to sell at different levels of value during a certain period. It is achieved by adding all the personal supplies at each level of value.
  7. Cost of Production : The cost of making or receiving goods and services that generate income directly for a firm, includes direct costs and indirect costs.
  8. Law of Supply : The supply of a product increases with the rise in its price and decreases with fall in its price, other things remaining constant.
  9. Extension and Contraction in Supply : When change in quantity of supply occurs only because of change in price, then the increase in supply is called extension of supply and decrease in supply is called contraction of supply.
  10. Increase and decrease in supply : When change in supply occurs due to any reason except price, it is called increase or decrease of supply.

RBSE Class 12 Economics Notes