Law of Supply

The Law of Supply explains that, assuming all other conditions remain unchanged, producers tend to offer a larger quantity of a product when its market price rises and a smaller quantity when the price declines. A higher selling price increases the potential return from production, so firms may shift more resources toward producing that item. Conversely, a price drop reduces expected earnings, making producers less willing to supply the same quantity. This relationship is typically illustrated by an upward-sloping supply curve, indicating that price and quantity supplied generally move together.

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For instance, if the price of wheat increases from ₹20 to ₹25 per kilogram, farmers may expand production because doing so becomes more profitable. If the price falls to ₹15, their incentive to cultivate wheat diminishes, resulting in a reduced supply.