Explain the Law of supply with diagram. |
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| Ans : The positive relationship between price and quantity supply is known as law of supply. According to law of supply other things remaining same, quantity supply increases with increase in price and quantity supply decrease with decrease in price.
Higher the price, Higher the supply
Lower the price, Lower the supply
It can be explained with the help of following table and diagram.
Supply schedule
Price (Rs.) Quantity supply (units)
1
10
2
20
3
30
4
40
5
50
In the given table at initial price Rs.1 quantity supply is 10 units. When price increases to Rs.2 then quantity supply increases to 20 units. Again when price increase to Rs.3 then quantity supply increases to 30 units and so on. This shows that there is positive relationship between price and quantity supply.
Supply curve
In the given diagram, ox- axis represent quantity supply and oy-axis represent price. At initial price Rs.1 quantity supply is 10 units. When price increase to Rs.2 then quantity supply increases to 20 units. Again when price increases to Rs.3 quantity supply increases to 30 units and so on. SS is the supply curve which always slopes upward from left to fight. This shows that there is positive relationship between price and quantity supply.
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