(i) Supply : Supply means an amount of a commodity which a producer is ready to sell at a particular price and at a particular time. Supply is different from stock. Stock of a commodity is the total amount available with the producer whereas supply is only that part of it which the producers are willing to bring into the market.

(ii) “The law of supply states that other things being equal, the supply of a commodity increases with an increase in its price and decreases with a fall in price. ’ ’ 

The main assumptions of the law are as follows :

1. Price of other related goods should not change. 

2. Technology of production should not change. 

3. Cost of factors of production should remain the same.

(iii) 1. Prices of Factors of Production : The supply of a commodity is also influenced by the prices of factors used in the production of that commodity. A fall in the price of factors of production will reduce the cost of production which, in turn, will increase the production and supply due to rise in margin of profits. If, on the other hand, the price of factors of production rises, supply will decrease due to fall in margin of profits.

2. State of Technology : If the producers make use of improved and advanced technology in their process of production, the costs of production will come down. Total supply, thus, will increase. But against it, supply of goods using old and inferior techniques of production will fall. That is why scientific discoveries and their applications to production of commodities are being made.

3. Goal of the Firms : The supply of a commodity also depends upon the goal of firms. Their goal may be profit maximisation or sales maximisation. If their goal is to maximise profits, more quantity will be supplied at a high price. But if the firms want to maximise their sales (as they think that increased supply is a source of status and prestige in the market) more quantity will be supplied even at the same price.