Supply schedule is a simple table that shows how much quantity a seller is willing to supply at different prices. It is an important tool in economics because it helps us understand the behaviour of producers and how they respond to changes in price. Producers always try to earn profit. When the price of a product increases, they feel encouraged to produce and sell more. When the price falls, they reduce supply because profit becomes low. A supply schedule presents this relationship clearly in a tabular form.
A supply schedule can be of two types. The first type is individual supply schedule. It shows the supply behaviour of a single producer. The second type is market supply schedule. It shows the combined supply of all producers in the market. Both are important for understanding how supply works in real markets such as the Indian agriculture market, mobile phone market, clothing market and so on. These schedules help businesses, consumers and the government make better decisions.
Individual Supply Schedule
The individual supply schedule explains the supply decisions of one producer for one product at different price levels. It is prepared by assuming that only price changes while other factors remain constant. These factors include price of inputs, technology, number of workers, government tax and weather conditions. This is called the assumption of ceteris paribus which means everything else remains unchanged.
A single producer always aims to maximise profit. Profit depends on the difference between selling price and cost of production. When the price increases, profit increases. Because of this, the producer wants to sell more units. When the price falls, the producer loses interest in producing more and reduces supply. The individual supply schedule captures this behaviour.
For example, consider a small farmer who produces wheat. At a low price he may supply only a small quantity because income is limited. As the price rises, he will try to increase the quantity supplied by using more labour or fertilizer. This increase in quantity with increase in price is shown in the supply schedule.
An individual supply schedule normally shows that supply rises with price. This upward movement reflects the law of supply. The law of supply states that other things remaining constant, the quantity supplied increases when price increases and decreases when price decreases. The individual supply schedule is the simplest way to present this law in numerical form.
The individual supply schedule is useful for analysing the behaviour of small firms and self employed producers. It helps in understanding how they adjust production when price changes. It also helps businesses plan their production during different seasons. In India many small shopkeepers use this logic for goods like vegetables, fruits, grains and household items.
Individual Supply Schedule (Example)
Assume a single producer sells tomatoes in the local market. The producer supplies different quantities at different prices. This table shows how one seller responds to price changes.
Individual Supply Schedule
| Price (per kg) | Quantity Supplied (Units) |
|---|---|
| 20 | 10 units |
| 30 | 18 units |
| 40 | 25 units |
| 50 | 35 units |
| 60 | 45 units |
Explanation
As the price increases, the producer becomes more willing to supply more tomatoes because higher price gives higher profit. When the price rises from 20 to 60, the quantity supplied also rises from 10 to 45 units. This shows the law of supply, which states that quantity supplied increases when price increases, assuming all other factors remain constant.
Market Supply Schedule:
A market supply schedule shows the total quantity supplied by all producers of a product in a market at different prices. It is created by adding the supply of each individual producer at every price level. This process is called horizontal summation. A market consists of many sellers. Each seller may have different costs, resources and capacity. When their individual supplies are added, the result is market supply.
The market supply schedule gives a complete picture of how the entire industry responds to price changes. For example, if three wheat farmers supply five, seven and ten units each at a certain price, the market supply at that price becomes twenty two units. When price increases further, each farmer may increase production. As a result, the market supply also increases. The market supply schedule captures this total behaviour in a table form.
Market supply depends on many factors. These include the number of sellers, input prices, government policies, natural conditions, level of technology and future expectations. If more sellers enter the market, market supply increases. If there is a good monsoon, agricultural supply rises. If fuel prices go up, cost increases and supply may fall. However, in a supply schedule only price is allowed to change while these other factors remain constant.
A market supply schedule normally has larger quantities compared to an individual supply schedule. This is because it represents entire industry output. It also shows stronger response to price changes. If price rises in the mobile phone market, many firms such as Samsung, Xiaomi and Vivo increase their supply. This combined response appears clearly in the market supply table.
Market supply schedules are used by companies to study competition. They help in predicting how much total quantity will be available in the market at various prices. They also help the government decide policies related to agriculture, manufacturing and essential commodities. For example, before fixing minimum support price for crops, authorities study the market supply of wheat, rice, sugarcane and pulses. This helps in avoiding shortage or excess supply in the market.
Market Supply Schedule (Example)
Assume there are three producers of sugar in a local market. Each producer supplies a certain quantity at different prices. By adding their individual supplies at each price, we get the market supply schedule.
Individual Supplies
Producer A, Producer B and Producer C supply different quantities based on price.
| Price (per kg) | Supply by Producer A | Supply by Producer B | Supply by Producer C |
|---|---|---|---|
| 30 | 20 units | 15 units | 10 units |
| 40 | 30 units | 25 units | 18 units |
| 50 | 40 units | 35 units | 26 units |
| 60 | 55 units | 45 units | 35 units |
| 70 | 70 units | 55 units | 45 units |
Market Supply Schedule
Add the supply of all three producers at each price.
| Price (per kg) | Market Supply (A+B+C) |
|---|---|
| 30 | 45 units |
| 40 | 73 units |
| 50 | 101 units |
| 60 | 135 units |
| 70 | 170 units |
Explanation
As the price increases, each producer increases the quantity supplied. When all producers respond similarly, the total market supply also increases. This table shows how the entire industry reacts to price changes.
Key difference Between Individual and Market Supply Schedules
| Aspect | Individual Supply | Market Supply |
|---|---|---|
| Meaning | Single seller | All sellers |
| Scope | Narrow | Broad |
| Quantity | Small | Large |
| Focus | One producer | Industry total |
| Data Source | Individual firm | Combined firms |
| Calculation | Single supply | Sum of supplies |
| Variation | Limited | Wide |
| Influence | Personal factors | Market factors |
| Use | Firm decisions | Market analysis |
| Complexity | Simple | Complex |
| Responsiveness | Low | High |
| Table Size | Small | Large |
| Accuracy | Specific | General |
| Control | Easy | Difficult |
| Application | Micro level | Market level |
Importance of Supply Schedules:
Supply schedules are important for many reasons. They help businesses plan production and pricing. They help consumers understand how prices move when supply changes. They help the government frame policies for different sectors. They also help students understand the basic law of supply and how producers behave in the market.
A supply schedule also helps in drawing a supply curve. The supply curve is a graphical representation of the schedule. It slopes upward from left to right, showing that supply rises with price. This curve is widely used in microeconomic analysis.
In India supply schedules are useful in agriculture markets, retail business, wholesale markets and even online platforms. Farmers, shopkeepers and companies study price movements to increase profit. This helps them decide how much to supply during festival seasons, wedding seasons or monsoon periods.
Determinants of Supply:
- Price of the Product
Price is the most important factor affecting supply. When the price of a product increases, producers feel encouraged to supply more because they earn higher profit. When the price falls, they reduce supply as profit becomes low. This movement follows the law of supply. Producers always watch market prices before deciding production levels. For example, if the price of onions rises sharply in India, farmers increase supply in the next season. If the price falls, they avoid producing large quantities. Thus, a direct relationship exists between price and supply, assuming all other factors remain unchanged.
- Cost of Production
Cost of production includes expenses on raw materials, labour, electricity, fuel and machinery. When production cost increases, it becomes expensive for producers to supply the same quantity. This reduces supply in the market. When cost decreases due to cheaper raw materials or better technology, producers can supply more at the same price. For example, if fuel prices increase, transportation cost rises and supply reduces. If seeds or fertilizers become cheaper, farmers can produce more. Therefore, cost of production has an inverse relationship with supply. Lower production cost encourages higher supply, and higher cost discourages supply.
- Technology
Technology improves the efficiency of production. Better machines, tools and techniques help producers make more goods at lower cost. When technology improves, supply increases because production becomes faster, cheaper and easier. For example, modern irrigation systems and improved seeds increase crop supply in India. In factories, automation and advanced machines increase output and reduce wastage. When technology is outdated or not available, supply remains low as production takes longer and costs more. Therefore, technological progress is a key determinant that leads to greater supply in the market.
- Prices of Related Goods
Producers often make more than one product. If the price of a related good increases, they may shift production towards that product to earn more profit. This affects the supply of the original product. For example, if the price of sugarcane rises, farmers may shift land from wheat to sugarcane. This reduces the supply of wheat. Similarly, if the price of cotton rises, farmers may grow more cotton and less of other crops. Thus, when the price of related goods changes, supply of the main product is affected.
- Government Policies
Government policies such as taxes, subsidies and regulations directly influence supply. When taxes increase, production cost rises and supply decreases. When the government gives subsidies, supply increases because producers get financial support. For example, fertilizer subsidies in India encourage farmers to increase production. Import restrictions and export rules also affect supply of goods. Supportive policies help expand supply, while strict or costly regulations reduce supply in the market. Government decisions play an important role in determining how much producers can supply.
- Natural Factors
Natural conditions like rainfall, temperature, climate, floods and droughts have a major impact on supply, especially in agriculture. Good weather increases supply because crops grow well. Poor weather reduces supply because production is affected. For example, a good monsoon leads to higher supply of rice and wheat in India. A drought reduces crop supply sharply. Natural disasters like cyclones or floods can destroy goods and interrupt production. Even in industries, natural factors can affect raw material availability. Thus, supply often depends on natural conditions.
- Number of Sellers
The total supply in the market depends on how many sellers participate. When more sellers enter the market, supply increases because more producers offer goods. When sellers exit the market due to losses or high costs, supply decreases. For example, when new mobile companies enter India, the supply of smartphones increases. When small shops shut down due to high expenses, market supply reduces. The number of sellers decides the overall availability of goods in the market.