2.2 Theory of Supply

Meaning: the quantity of a good sellers offer for sale at a given price, in a given period.Determinants of supply:1. Price of the good (P) — the prime mover;2. Prices of inputs/production cost (C) — fertiliser and diesel prices move vegetable supply;3. Technology (T) — better technique shifts supply right;4. Taxes and subsidies (S) — a VAT or excise rise reduces supply; subsidies raise it (a legalinstrument visibly moving a curve);5. Expectations of future prices (hoarding vs releasing stocks);6. Number of sellers (N) — entry raises market supply;7. Weather and natural conditions (W) — agriculture and hydropower live by it (a weak monsoon shifts the rice supply curve left).The Law of Supply:ceteris paribus, quantity supplied varies directly with price — higher price makes production more profitable, so more is offered. The supply curve slopes upward. Exceptions: fixed supply regardless of price (land, antiques, a Bhimsen Thapa-era statue — perfectly inelastic vertical supply in the limit); backward labour supply at very high wages.Movement vs shift: own-price change = movement along the curve; any other determinant = shift (right = increase, left = decrease).