The basic function of a producer is to produce goods and services, which are offered for sale in the market. The market forces the supply and demand which determine the price of goods and services. Therefore, the study. of supply is as important as the study of demand. The term supply indicates the relationship between price and quantity supplied. Law of supply depicts the producer behaviour at the time of changes in the prices of goods and services. When the price of a good rises, the supplier increases the supply in order to earn a profit because of higher prices. When prices of a product increase, producers are willing to manufacture more of the product to realize greater profits. Likewise, falling prices depress production as producers may not be able to cover their input costs upon selling the final good on the other hand, when prices are higher, producers are encouraged to increase their levels of activity to reap more benefit. This behaviour to seek maximum amounts of profits forces the supply curve to be upward sloping.

Dency Varghese

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