Law of Supply its assumptions

Supply of a commodity is the function of a price. The law of supply depicts this functional relationship between price of a Commodity and its supply. Unlike law of demand, the quantity supplied generally varies directly with price. The law of supply states that other things being equal; more of a commodity is supplied at a higher price, and less at a lower price. Thus the quantity supplied of a commodity falls with a fall in price and rises with a rise in price. The relation between price and quantity supplied is direct and positive. The supply schedule and supply curve reflect the law of supply.

Assumptions of the law

Assumptions:

The law of supply is based on following assumptions.

(a) The income of buyers and sellers remain constant.

(b) The commodity must be divisible and available in small units.

(c) The tastes and preferences of buyers remains unchanged.

(d) The cost of all factors of production remains constant.

(e) The time period under consideration must be short.

(f) The technology level remains constant.

(g) The producer is rational.

(h) Natural factors should be normal.

(i) Expectation of producer and the Govt. policy should remain constant.