Question

Supply is constant in
1. Short period
2. Very short period
3. Long period
4. Very long period

Answer 1

Correct Answer - Option 2 : Very short period

The correct answer is a very short period.

• Supply means the quantity of a particular commodity which a seller is ready to sell at a given price.
• Supply is constant in a very short period
• Factors governing supply
  • The following are the major factors that govern the supply of a  commodity:
    • (1) Price of a commodity; (2) Prices of related commodities; (3) Objectives of the producers; (4) State of technology; (5) Prices of factors of production; (6) Natural conditions; (7) Agreement among producers; (8) Future price expectations; (9) Number of producers (suppliers); (10) Monopolistic policies; (11) Economic and political conditions; and (12) Taxes and subsidies.
• Supply function
  • A supply function is a set of determinants of supply.
  • A simple supply function can be stated as follows: Sx = f (Px, Pr, F, T, G)
    • Supply function describes the functional relationship between the supply of a commodity (say N) and other determinants of supply, i.e., price of a commodity (px), price of a related commodity (Pr), price of the factors of production (F), technology (T), and goals or general objectives of the producer (G).

•  Assumptions to the law of supply:
  • The income of buyers remains constant.
  • The tastes and preferences of buyers remain constant.
  • cost of all factors of production remains constant.
  • The technology level remains constant.
  • The commodity is divisible.
  • The Law of supply states only a static situation.
• ​Why does the supply curve slope upward?
  • The main reasons for the operation of this law are as follows:
    • The price of a commodity serves as an incentive for producers and sellers. If the price of a commodity increase, it will motivate producers to produce more and sellers to sell more of the commodity.
    • If the price of a commodity falls, producers and sellers would like to decrease the supply of that commodity because it will reduce their profit margin.