Law of Supply with its exceptions/limitations/criticisms.

Law of Demand... 

It is another important theory in micro-economics. It is als the basis of consumption, production, exchange and distribution of goods and services. It was als introduced and developed by the neoclassical economist Alfred Marshall in his book "Principle of Economics" published in 1890 AD. This law is based on the functional relationship between price and quantity supplied of a particular commodity. 

      According to this law, if other factors remaining the same, when price increases, quantity supplied of a particular commodity also increases and vice versa. In other words, quantity supplied of a commodity increases along with increase in price and vice versa, other factors remaining the same. It means there is direct relationship between price and quantity supplied of a particular commodity. 

Assumptions... 

The law of supply is based on several assumptions which may not be applicable in real life. They are as follows:

1. No change in price of related commodities.  

2. No change in number of firms in the market. 

3. No change in objective of the firm. 

4. No change in price of factors of production. 

5. No change in tax and subsidy policy of the government etc.

   On the basis of above assumptions, the law can be explained with the help of following schedule and diagram:

Supply Schedule... 

In the above schedule, it is seen that the producer supplied 5 kg of a commodity when the price is Rs. 2 per kg of a commodity. When the price increases from Rs. 2 per kg to Rs. 4, Rs.6, Rs. 8 and Rs. 10 per kg, quantity supplied of the commodity by the producer also increases from 5 kg to 10 kg, 15 kg, 20 kg and 25 kg respectively. The schedule clearly shows the direct and positive relation between price and quantity supplied of a particular commodity. If we present the schedule in the form of diagram, we will get the supply curve as shown in the following diagram:

Supply Curve... 

In the above figure, quantity supplied and price of a commodity are measured along that 'x' and 'y'all axis respectively. SS is the supply curve which is made by joining various corresponding points (a, b, c, d and e) of price supply combination. The slope of the curve is positive i.e. supply curve is upward sloping from left to right. It indicates that the direct relation between price and quantity supplied for any particular commodity in the market. 

Exceptions/limitations/Criticisms of the law of Supply... 

The conditions or situations on which the principle of supply isn't applicable are called exceptions or limitations of the law of supply. Some of them are as follows:

1. Auction sale

2. Agricultural goods

3. Perishable goods

4. Stock clearance

1. Auction sale: In case of auction sale, the supplier must supply the commodity to the highest bidder even if the offered price is lower than expected price. It is also against the principle of law of supply. 

2. Agricultural goods: The law of supply isn't applicable in case of agricultural products. They have to be supplied immediately after the harvest whatever be the price. 

3. Perishable goods: There are some commodities which can't be stored for a long time. The law of supply isn't applicable in case of such commodities. They have to be supplied after production whatever be the price. 

4. Stock clearance: If a seller wants to clear old stock in order to bring new stock for sale, he will reduce the price and increases the quantity supplied. It is also against the principle of law of supply. 

5. The law isn't applicable in case of change in price of related commodities. 

6. The law isn't applicable in case of change  in objective of the firm and the number of the firms in the market. 

7. The law isn't applicable in case of the change in tax and subsidy policy of the government. 

8. The law isn't applicable in case of development of technology and development of infrastructure.