“Supply refers to the quantity of a commodity that producers are willing and able to sell at different prices, during a given period of time, while other things remains constant.”
Before getting into depth there are three things that we should remember about supply:
1. Supply 
Production
Supply is not the same as production. Supply is the quantity offered for sale in the market. A company may produce 10,000 units of a product but may decide to supply only 7,000 units and keep 3,000 units in the warehouse (inventory). So:
“Current Supply = Current Production
Changes in Inventory”
Example:
Suppose Amul produces 1 lakh litres of milk per day. However, it converts some of that milk into butter, cheese, and milk powder for storage. The milk that actually reaches the market for consumers to buy is supply, not the total production.
2. Supply is Always at a Given Price
A supply statement is meaningless without a price attached to it. Meaning “a farmer supplies 50 quintals of wheat” is incomplete. We must say “A farmer is willing to supply 50 quintals of wheat at ₹2500 per quintal per month”. Without mentioning the price, the statement has no economic meaning.
3. Supply is a Flow (Not a Stock)
Supply is always measured over a period of time such as; per day, per week, per month, or per year. It is never measured at a single point in time.
Example:
When we say “Apple supplies 50 million iPhones,” it must be “50 million iPhones per quarter” or “per year”. The time dimension is essential.
The Supply Function
Supply function shows the functional relationship between quantity supplied and various factors that affects quantity supplied.
The general supply function is:
Where;
: Price of 
: Price of relatedgoods
: Number of Firms
: Technology
: Future price expectations
: Goal of the producer
Determinants of Supply
1. Price of the Commodity Itself (Own Price)
“When the price of a commodity rises, producers are willing to supply more. When the price falls, they supply less.”
This happens because a higher price means higher revenue and potentially higher profits, which motivates producers to produce and sell more.
Example (Vegetable Vendors in a Mandi):
Imagine you are a tomato farmer. If the market price of tomatoes is ₹10 per kg, you might supply 100 kg per day. But if the price rises to ₹40 per kg, you will try to supply 300 kg or more (it can be done either by harvesting early or diverting stock from storage).
On the other hand, if the price crashes to ₹2 per kg, many farmers don’t even bother to harvest because the selling price doesn’t cover their transportation costs. This is why we sometimes see images of farmers dumping tomatoes on the road.
Another Example (Surge Pricing on Ola/Uber):
When Ola or Uber increases its fare during peak hours (surge pricing), more drivers come online and are willing to offer rides. The higher the ‘price’ (fare), the more the ‘supply’ (number of available rides). This is the how law of supply works in gig economy.
In both the above examples, as per definition other things are constant except its own price.
2. Prices of related goods:
Consider a firm selling tea. If price of a coffee rises in market, the firm will be willing to sell less tea at its existing price. The same quantity of tea will be sold only at a higher price.
Other way of looking at this can be; Producers, especially profit-maximizing ones, are always looking at the relative profitability of producing different goods. If the price of another good rises, it becomes more attractive to produce, and the producer may shift resources away from the current good.
“When price of other goods rises, it implies that commodity becomes relatively less profitable which eventually intends to decrease the supply of commodity”.
Other way round;
“When prices of other goods falls, it implies that commodity becomes more profitable due to which the supply of current commodity increases.”
Example : Wheat vs. Mustard for Indian Farmers
An Indian farmer in Rajasthan or Madhya Pradesh typically has a choice i.e., grow wheat or grow mustard during the Rabi season. If the government announces a very high MSP (Minimum Support Price) for wheat, many farmers will switch from mustard to wheat. As a result; supply of wheat increases and supply of mustard decreases.
In India, government policies on MSP significantly influence the choice of farmers about crops.
Another Example: Petroleum Refining
A petroleum refinery produces petrol, diesel, kerosene, and LPG from crude oil. If the price of diesel rises sharply (due to higher demand from the transport sector), the refinery may shift its processing to maximize diesel output which could reduce the supply of petrol or kerosene even if their prices haven’t changed.
3. Number of Firms in the Industry
Market supply of a commodity depends upon number of firms in the industry. Increase in the number of firms implies increase in market supply, and decrease in the number of firms implies decrease in market supply of a commodity.
4. Technology
Technology is game-changer in production. Improvements in technology leads to lower costs of production, higher efficiency and greater output from the same inputs.
“Better technology implies lower cost per unit and higher profits implies increase in supply at every price.”
Example: (Smartphones)
In 2010, manufacturing a smartphone with a decent camera and processor was expensive. By 2024, due to massive advances in semiconductor technology and manufacturing processes, the cost of producing a smartphone with far superior specs had fallen dramatically. This is why companies like Xiomi, Realme, and Samsung can now supply feature ₹8,000 – ₹12,000 i.e., a price point that was unimaginable a decade age.
The supply of affordable smartphones has exploded, not because the price of phones went up, but because technology improved and brought down production costs.
Another example: (Green Revolution in India)
In the 1960s. Indian agriculture adopted High Yielding Variety (HYV) seeds, chemical fertilizers, and modern irrigation techniques (the Green Revolution). This increased the supply of wheat and rice at existing prices. Punjab and Haryana went from food-deficit regions to the “granary of India” and all because of change in technology.
Another example: (3D Printing)
3D printing technology is now enabling manufacturers to produce spare parts, prosthetics, and even houses at a fraction of the traditional cost. As this technology matures, the supply of such products will increase without any change in their market price.
5. Expected Future Price
If the producer expects price of the commodity to rise in the near future, current supply of the commodity will reduce. If, on the other hand, fall in the price is expected, current supply will increase.
5. Goals of the Producer
The goals of the producer differs for each producer as not all producer aim to maximize profits. Different objectives lead to different supply decisions, even all other factors remain the same.
“The objective of the producer influences how much they are willing to produce and supply at a given price.”
Here are some possible goals:
| Goal of Producer | Impact on Supply |
| Profit Maximization | Supply follows the standard law of supply |
| Sales/Revenue Maximization | Producer may supply more even at lower prices to capture market share |
| Social welfare (e.g., government enterprises) | May supply more even at a loss |
| Survival | Supply just enough to stay in business |
| Market Dominance | May flood the market with supply to drive out competitors |
Example: (Amazon and Flipkart)
For years, Amazon India and Flipkart operated at loss. Their goal was not short-term profit maximization but market share dominance. They supplied goods at heavily discounted prices (sometimes below cost) to attract customers and build a user base. In this case, supply was high even though the “effective price” received by the seller (after discounts) was very low. This is a clear deviation from the standard law of supply.
Another example: (Indian Railways)
Indian Railways is a government enterprise. Its goal includes social welfare such as connecting remote villages, providing affordable travel for the poor, etc. It continues to supply rail services on many routes that are commercially unviable (loss-making) because its objective is not purely profit-driven.
Another Example: (Jio’s Launch)
When Reliance Jio launched in 2016, it offered free data and calling services for months. The “supply” of telecom services increased massively, not because the price was high, but because Jio’s goal was to disrupt the market and gain a dominant subscriber base. The law of supply i.e., Higher price, higher supply; clearly did not apply here because the producer’s goal was different.