EXCEPTIONAL SUPPLY CURVES –
EXCEPTIONS TO THE LAW OF SUPPLY
1.
Vertical Supply Curve
ü The supply of certain commodities cannot be change
due to change in its price. For example, the rare goods such as classical
paintings, old manuscripts, a rare postage stamp, old coins etc. the supply is
fixed. In some cases, the supply may be fixed in the long run. In such cases,
the supply curve will be a vertical line parallel to OY.
1.
Backward Sloping Supply Curve
ü A backward supply curve shows a smaller quantity
would be supplied at higher prices. For example, the wages of the labour is Nu.
150 per day and he is willing to work 5 days to earn Nu. 750. Due to an
increase in his wage rate to Nu. 200, he is willing to work only four days.
MOVEMENT ALONG THE SUPPLY CURVE (Change in Quantity
Supplied)
ü When the quantity supplied changes as a result of
change in price while other factors remaining same or constant, it is known as
change in quantity supplied. It is of TWO
types:
1. Extension of Supply.
2. Contraction of Supply.
1.
Extension of Supply
When the quantity supplied rises due to rise in the
price. It is known as extension of supply. It is the upward movement (A to A1)
along the same supply curve.
2.
Contraction of Supply
When the quantity supplied falls due to fall in the
price. It is known as contraction of supply. It is the downward movement (A to
A2) along the same supply curve.
SHIFT OF THE SUPPLY CURVE (Change in Supply)
ü When the quantity supplied of a commodity changes
due to changes in any other factors except the price of the commodity is called
change in supply. It is of TWO
types:
1. Increase in Supply.
2. Decrease in Supply.
Home Work (Students’ Activity)
1. Write THREE distinctions between Extension of Supply
and Increase in Supply.
2. Give THREE differences between Contraction of Supply
and Decrease in Supply.
3. Why does Supply Curve Slope upward from Left to
Right?
4. Give TWO factors each for Increase in Supply and Decrease in Supply.
No comments:
Post a Comment