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Concept of supply and stock and Determinants of supply- Answered

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Supply

Supply refers to the quantity of a commodity offered for sale considering different possible prices at a given point of time. According to Thomas, “The supply of goods is the quantity offered for sale in a given market at a given time at various prices”. 

Stock

Stock of a commodity refers to the total quantity of a commodity available in the market at any given time with the sellers. Supply refers to that part of the stock which the seller is prepared to sell at a given price and at a given time. Supply function: Supply function describes the functional relationship between supply of a commodity and other determinants of supply.The important determinants of supply can be grouped together in a supply function as follows: 

S N = f (PN, PR, F, T, G ,E)

Determinants of supply are as: 

  1. price of the commodity (PN) 
  2. Price of related goods (PR )
  3. Price of the factors of production (F) 
  4. technical knowhow (T) and 
  5. Goals or general objectives of the producer. 
  6. Future expectations(E)

Some of important factors which determine the supply of a commodity are as under: 

• Price of commodity:- There is a direct relationship between price of a commodity and its quantity supplied. Generally, higher the price of a commodity higher will be its quantity supplied and vice versa.

• Price of related goods: - The supply of a good depends upon the price of other goods. An increase in the price of other goods makes them more profitable for the firm. They will increase its supply. On the other hand supply of the good whose price has not changed may decrease.

• Price of factors of production:- Supply of commodity is also affected by the price of factors used for the production of the commodity. If the factor price decreases, cost of production also reduces accordingly supply increases.

• Expected Change in future price:- If the producer expects price of the commodity to rise in near future, current supply of the commodity will decrease and same is true for vice versa.

• Besides,technical knowhow ,number of firms and objectives of the producer ,also determine the supply of a commodity.

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