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Maharashtra State Board · HSC Commerce · Class 12 (Std XII)

Class 12 Economics Chapter 4: Supply Analysis

Short notes, key concepts, quick revision and practice MCQs with answers

This chapter explains what supply is, how it differs from stock and output, and how supply schedules, curves and the law of supply work. It also covers movements and shifts of the supply curve, and cost and revenue concepts.

Key concepts: Supply Analysis

Supply
The quantity of a commodity that a seller is willing and able to offer for sale at a given price during a certain period of time. It is a flow concept.
Stock
The total quantity of a commodity a seller holds for sale at a point of time. It is potential supply, and stock normally exceeds supply.
Supply schedule and curve
A supply schedule is a table of prices and quantities supplied. Plotted on a graph it gives an upward sloping supply curve.
Law of supply
Other things constant, a higher price means a larger quantity supplied and a lower price means a smaller quantity supplied (Sx = f(Px)).
Variation vs change in supply
Variation (expansion or contraction) is a movement along the same curve due to price. Change (increase or decrease) is a shift of the curve due to other factors.
Total cost
Total expenditure on factors of production, equal to total fixed cost plus total variable cost. Average cost is TC divided by total quantity.
Marginal cost
The addition to total cost from producing one more unit: MCn = TCn - TC(n-1).
Revenue concepts
Total revenue = price x quantity. Average revenue = TR / TQ. Marginal revenue is the addition to TR from selling one more unit.

Quick revision: important points

Practice MCQs with answers

  1. Which statement best describes supply?

    1. The quantity buyers wish to buy at a price
    2. The total output produced in an economy over many years
    3. The quantity a seller is willing and able to offer for sale at a given price in a period
    4. The quantity of goods lying unsold in a warehouse
    Show answer

    Answer: C. The quantity a seller is willing and able to offer for sale at a given price in a period
    Supply is tied to price and time: it is what a seller is ready and able to offer at a price during a period.

  2. Which term is called potential supply, because supply is not possible without it?

    1. Stock
    2. Total revenue
    3. Marginal cost
    4. Aggregate demand
    Show answer

    Answer: A. Stock
    Stock is the quantity a seller holds for sale at a point of time, so it is the source from which supply is drawn.

  3. Supply is called a flow concept because it is measured

    1. only at one point of time
    2. over a period of time such as a day, week or month
    3. only for durable goods
    4. only in the long run
    Show answer

    Answer: B. over a period of time such as a day, week or month
    Supply is the amount offered over a period of time, unlike stock which is measured at a point of time.

  4. In an individual supply schedule, as price rises from Rs 10 to Rs 50 the quantity supplied rises from 100 kg to 500 kg. This shows

    1. an inverse relationship between price and supply
    2. no relationship between price and supply
    3. that supply is fixed
    4. a direct relationship between price and supply
    Show answer

    Answer: D. a direct relationship between price and supply
    Price and quantity supplied move in the same direction, so the relationship is direct and the supply curve slopes upward.

  5. At a price of Rs 30, sellers A, B and C supply 300 kg, 400 kg and 500 kg respectively. The market supply at Rs 30 is

    1. 900 kg
    2. 1200 kg
    3. 1500 kg
    4. 400 kg
    Show answer

    Answer: B. 1200 kg
    Market supply is the sum of all sellers: 300 + 400 + 500 = 1200 kg.

All Class 12 Economics chapters

Class 12 Economics notes: all chapters