the supply function, x = g ( p ) Fig : . x = g ( p ) x (Supply) Supply curve p (Price) o Acute angle Slope is +𝑣𝑣𝑣𝑣 Acute angle \ slope is positive The “supply - price relationship” curve illustrates the positive relationship between price and quantity supplied. Observations (i) Price and quantity of the supply function are in direct variation. (ii) The graph of supply function lies only in first quadrant.
- - The law of demand / supply tells us the direction of change, but not the rate at which the change takes place. Equilibrium Price The price at which the demand for a commodity is equal to its supply is called as Equilibrium Price and is denoted by p E . Equilibrium Quantity The quantity at which the demand for a commodity is equal to its supply is called as Equilibrium Quantity and is denoted by x E . NOTE Usually the demand and supply functions are expressed as x in terms of p , so the equilibrium quantity is obtained either from the demand function (or) from the supply function by substituting the equilibrium price.
Equilibrium Point The point of intersection of the demand and supply function ( p E , x E ) is called as equilibrium point. Diagrammatical explanation of equilibrium price, equilibrium quantity and equilibrium point o x (quantity) Demand fuction Supply fuction p (Price) Equilibrium point ( p E , x E ) p E x E Equilibrium quantity Equilibrium Price Fig: . Average and Marginal concepts Usually, the variation in the dependent quantity ‘ y ’ with respect to the independent quantity ‘ x ’ can be described in terms of two concepts namely (i) Average concept and (ii) Marginal concept. (i) Average concept The average concept expressed as the variation of y over a whole range of x and is denoted by y x .
(ii) Marginal concept The marginal concept expressed as the instantaneous rate of change of y with respect to x and is denoted by dy dx . Remark: If ∆