Gujarat BoardEnglish MediumSTD 11 CommerceEconomicsSupply2 Marks
Question
"Generally, there is direct relationship between price and supply." - Explain.
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Answer
Generally, if all other factors remain constant and the price of a commodity decreases the producer's profit decreases and he is less interested in production. As a result supply decreases. On the other hand, with the increases in the price of commodity, there is more profitability and changes in the supply of a commodity are more in the same direction. Thus, direct relationship exists between the price of a commodity and the supply of a commodity.
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