Answer the following questions:
What are the assumptions of the law of supply?
Answer: The law of supply is based on the following assumptions:
i. The price of inputs, or firm's cost of production, remains the same.
ii. State of technology does not change i.e. there is neither appreciation nor depreciation of the existing technology.
iii. Price of the related goods (such as substitute goods and complementary goods) remains the same.
iv. Government policies remain unchanged.
v. The objective of the firm remains unchanged.
vi. There is no change in the natural factors and there is no advent of any natural calamity such as an earthquake etc.
i. The price of inputs, or firm's cost of production, remains the same.
ii. State of technology does not change i.e. there is neither appreciation nor depreciation of the existing technology.
iii. Price of the related goods (such as substitute goods and complementary goods) remains the same.
iv. Government policies remain unchanged.
v. The objective of the firm remains unchanged.
vi. There is no change in the natural factors and there is no advent of any natural calamity such as an earthquake etc.
