Class 11 Micro Economics Notes · CBSE
Determinants, Supply Function, Schedule and Curve
Determinants, Supply Function, Schedule and Curve — understanding the factors that determine supply and how the supply schedule and curve are built. CBSE Class 11 Microeconomics notes with schedules and graphs.
Last updated: 16 Sep 2026
Notes
Price of the Given Commodity — the Most Important Determinant
The most important factor determining the supply of a commodity is its price. As a general rule, the price of a commodity and its supply are directly related.
As the price increases, the quantity supplied of the given commodity also rises and vice-versa.
It happens because at higher prices there are greater chances of making a profit — it induces the firm to offer more for sale in the market.
Supply as a Function of Price
Supply (S) is a function of price (P). The direct relationship between price and supply, known as the 'Law of Supply', is discussed in its own topic page. The remaining determinants are termed 'other factors' or 'factors other than price'.
Other Determinants of Individual Supply
There are several important factors that determine the supply of a commodity. A change in any one of these factors will result in a change in the supply of the commodity.
As resources have alternative uses, the quantity supplied of a commodity depends not only on its price, but also on the prices of other commodities. An increase in the prices of other goods makes them more profitable in comparison to the given commodity. As a result, the firm shifts its limited resources from the production of the given commodity to the production of other goods. Example: an increase in the price of another good (say, wheat) will induce the farmer to use land for the cultivation of wheat in place of the given commodity (say, rice).
Prices of the factors of production or inputs (like labour, capital, raw material, etc.) used in the process of production constitute the cost of production of the commodity. If the prices of all or any of these factors or inputs increase, the cost of production also increases — this decreases the profitability, so the seller reduces the supply. A decrease in the prices of factors or inputs increases the supply due to a fall in cost of production and a subsequent rise in profit margin. Example: to make ice-cream, firms need various inputs like cream, sugar, machine, labour, etc. When the price of one or more of these inputs rises, producing ice-creams becomes less profitable and firms supply fewer ice-creams.
Technological changes influence the supply of a commodity. Advanced and improved technology reduces the cost of production, which raises the profit margin — it induces the seller to increase supply. However, technological degradation or complex and outdated technology will increase the cost of production and lead to a decrease in supply.
An increase in taxes raises the cost of production and thus reduces the supply, due to a lower profit margin. On the other hand, tax concessions and subsidies increase the supply as they make it more profitable for the firms to supply goods.
Generally, the supply of a commodity increases only at higher prices as it fulfills the objective of profit maximization. However, with a change in trend, some firms are willing to supply more even at those prices which do not maximise their profits. The objective of such firms is to capture extensive markets and to enhance their status and prestige.
Determinants of Market Supply
Market supply is influenced by all the factors affecting individual supply. In addition, it is also affected by the following factors:
Number of Firms in the Market
When the number of firms in the industry increases, market supply also increases due to a large number of producers producing that commodity. However, market supply will decrease if some of the firms start leaving the industry due to losses.
Future Expectation Regarding Price
If sellers expect a rise in price in the near future, then current market supply will decrease in order to raise the supply in the future at higher prices. However, if the sellers fear that the prices will fall in the future, then they will increase the present supply to avoid losses in the future.
Means of Transportation and Communication
Proper infrastructural development, like improvement in the means of transportation and communication, helps in maintaining an adequate supply of the commodity.
| S.No. | Determinant | Applies to |
|---|---|---|
| 1 | Price of the given commodity | Individual & Market |
| 2 | Price of other goods | Individual & Market |
| 3 | Prices of factors of production (inputs) | Individual & Market |
| 4 | State of technology | Individual & Market |
| 5 | Government Policy (Taxation Policy) | Individual & Market |
| 6 | Goals/Objectives of the firm | Individual & Market |
| 7 | Number of firms | Market only |
| 8 | Future expectation regarding price | Market only |
| 9 | Means of transportation and communication | Market only |
Change in Quantity Supplied vs Change in Supply
Test Yourself — Change in Quantity Supplied vs Change in Supply
Supply Function
Individual Supply Function
| Symbol | Meaning |
|---|---|
| Sₓ | Supply of the given commodity x |
| Pₓ | Price of given commodity x |
| Pₒ | Price of other goods |
| P_f | Prices of factors of production |
| S_t | State of technology |
| T | Taxation policy |
| G | Goals of the firm |
Market Supply Function ⭐
| Symbol | Meaning |
|---|---|
| Sₓ | Market supply of given commodity x |
| Pₓ | Price of the given commodity x |
| Pₒ | Price of other goods |
| P_f | Prices of factors of production |
| S_t | State of technology |
| T | Taxation policy |
| G | Goals of the market |
| N | Number of firms |
| F | Future expectation regarding Pₓ |
| M | Means of transportation and communication |
Market supply is affected by all the factors affecting individual supply, plus the number of firms, future expectations regarding price, and means of transportation and communication.
Supply Schedule
| Price (₹) | Quantity supplied of good x (units) |
|---|---|
| 1 | 0 |
| 2 | 5 |
| 3 | 10 |
| 4 | 15 |
| 5 | 20 |
| 6 | 25 |
The quantity supplied of commodity x increases with increase in price: the producer is willing to sell 5 units at ₹2; when the price rises to ₹3, supply also rises to 10 units.
Reserve Price (Minimum Supply Price): the producer is not willing to sell any quantity of the product at a price of ₹1 per unit.
| Price (₹) Pₓ | Individual Supply S_A (units) | Individual Supply S_B (units) | Market Supply S_A + S_B (units) |
|---|---|---|---|
| 1 | 0 | 0 | 0 |
| 2 | 5 | 10 | 15 |
| 3 | 10 | 20 | 30 |
| 4 | 15 | 25 | 40 |
| 5 | 20 | 35 | 55 |
| 6 | 25 | 40 | 65 |
At price ₹2, market supply is 15 units; when price rises to ₹3, market supply rises to 30 units. So the market supply schedule also shows the direct relationship between price and quantity supplied.
Supply Curve
It shows the direct relationship between price and quantity supplied, keeping other factors constant.
It can be drawn for any commodity by plotting each combination of the supply schedule on a graph.
Like supply schedules, supply curves can be drawn both for individual producers and for all the producers in the market — the individual supply curve and the market supply curve.
Fig 9.1 — Individual Supply Curve
The supply curve SS slopes upwards due to the positive relationship between price and quantity supplied.
Fig 9.2 — Market Supply Curve
The market supply curve is flatter than all individual supply curves. It happens because with a change in price, the proportionate change in market supply is more than the proportionate change in individual supplies.
Due to the direct relationship between price and supply, the supply curve slopes upwards — so the slope is positive.
The slope of the supply curve measures the flatness or steepness of the supply curve, based on the absolute change in price and quantity.
Solved Example
Problem
Solution
Slope of Supply Curve = ΔP ÷ ΔQ = (8 − 4) ÷ (4 − 2) = 2
For 'Supply curve is the rising portion of MC curve', refer to the Power Booster Section.
Key Takeaways
Key Takeaways
- Supply is determined by own price (the most important factor) plus other factors: prices of other goods, input prices, state of technology, government policy and goals of the firm. ⭐
- Market supply adds three more determinants: number of firms, future price expectations, and means of transport and communication. ⭐
- Change in quantity supplied is caused by own price; change in supply is caused by factors other than price. ⭐
- The supply function expresses quantity supplied as a function of all determinants: Sₓ = f(Pₓ, Pₒ, P_f, S_t, T, G, …). ⭐
- The supply schedule is a table of price–quantity combinations; the reserve price is the minimum price at which the seller offers any quantity. ⭐
- The supply curve slopes upwards; the market supply curve is the horizontal sum of individual supply curves and is flatter than each of them. ⭐
- Slope of the supply curve = ΔP ÷ ΔQ — it is positive.