Get summaries, questions, answers, solutions, notes, extras, PDF and guide of Class 11 (first year) Economics textbook, chapter 9 Theory of Supply which is part of the syllabus of students studying under AHSEC/ASSEB (Assam Board). These solutions, however, should only be treated as references and can be modified/changed.
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Summary
The chapter on the theory of supply focuses on how sellers behave in a market. It begins by defining supply as the amount of a commodity a seller is willing to offer at a given price during a specific time period. This willingness to sell can differ from the actual quantity sold. Supply is directly linked to the price of a commodity and is expressed as a flow over time, such as per day or per year. A distinction is made between “supply,” which refers to the amount a seller is prepared to sell, and “stock,” which is the total available quantity.
Next, the chapter explains the difference between individual and market supply. Individual supply refers to the quantity a single seller is willing to offer, while market supply is the combined quantity all sellers are ready to provide. The chapter uses an example of three firms producing sugar at different quantities to show how market supply is the sum of individual contributions.
Various factors influence supply. The most important is the commodity’s price: higher prices lead to more supply as sellers expect higher profits. Other factors include the prices of related goods, input costs, technology improvements, and government policies like taxes and subsidies. The goals of the firm also matter. Some firms may aim for profit, while others focus on sales or reducing risks.
The law of supply states that the quantity supplied increases when the price rises, assuming other conditions remain the same. The chapter highlights exceptions to this law, such as when sellers expect future price changes or deal in perishable goods, which must be sold quickly, regardless of price.
Also, the chapter discusses price elasticity of supply, which measures how much supply responds to changes in price. Elastic supply means even a small price change leads to a large change in quantity supplied. Conversely, inelastic supply indicates that price changes have little effect on supply. Various methods, such as percentage and geometric methods, help measure this elasticity.
Textbook solutions
Very Short Answer Type Questions
1. Define supply.
Answer: Supply refers to the quantity of a commodity that a firm is willing and able to offer for sale at a given price during a given period of time.
2. Define market supply of a good.
Answer: Market supply refers to the quantity of a commodity that all firms are willing and able to offer for sale, at each possible price during a given period of time.
3. State any two factors determining supply.
Answer:
- Commodity’s Own Price: The higher the price, the larger will be the supply.
- Prices of Other Goods: The supply of a commodity also depends upon the prices of other goods.
4. Define supply function.
Answer: The supply function states the functional relationship between the quantity supplied of a commodity and its determinants. It may be written as:
S₁ (x) = f (P).
(Here, S = Supply of commodity X; f = Functional relation; P = Price of commodity X)
5. What is the shape of a supply curve?
Answer: The shape of a supply curve is upward sloping, indicating that as price increases, the quantity supplied also increases.
6. What is a supply schedule?
Answer: A supply schedule is a table that shows the relationship between the price of a commodity and the quantity of the commodity that a producer is willing to supply.
7. State the law of supply.
Answer: The law of supply states that, other things being equal, the quantity supplied of a commodity rises directly with its price.
8. When is the supply curve of a firm a vertical straight line parallel to the X-axis?
Answer: The supply curve of a firm is a vertical straight line parallel to the X-axis when the supply is perfectly inelastic.
9. What is meant by change in supply?
Answer: Change in supply refers to an increase or decrease in the supply of a commodity due to factors other than its own price. These factors can include changes in input prices, technology, number of firms, government policies, and expectations of future prices.
10. What is meant by change in quantity supplied?
Answer: Change in quantity supplied refers to a movement along the supply curve due to a change in the commodity’s own price, keeping other factors constant.
11. What effect does an increase in input price have on supply curve?
Answer: An increase in input price shifts the supply curve to the left, as it increases the marginal cost of production, leading producers to supply less at the same price level.
12. What causes a movement along a supply curve of a good?
Answer: A movement along a supply curve of a good is caused by a change in the price of the good itself.
13. What is meant by extension of supply?
Answer: Extension of supply refers to an increase in the quantity supplied due to a rise in the price of the commodity, which leads to a movement along the supply curve.
14. What is meant by contraction of supply?
Answer: Contraction of supply refers to a decrease in the quantity supplied due to a fall in the price of the commodity, which leads to a movement along the supply curve.
15. Define increase in supply.
Answer: Increase in supply refers to a situation where more quantity of a commodity is supplied at the same price due to factors such as improvement in technology, reduction in input costs, or favorable government policies. It leads to a rightward shift in the supply curve.
16. Define decrease in supply.
Answer: Decrease in supply refers to a situation where less quantity of a commodity is supplied at the same price due to factors like a rise in input costs, adverse government policies, or reduction in the number of firms. It leads to a leftward shift in the supply curve.
17. What causes a downward movement along a supply curve?
Answer: Decrease in price .
18. What causes an upward movement along the supply curve of a commodity?
Answer: Increase in price .
19. If a farmer grows rice and wheat, how will an increase in the price of wheat affect the supply curve of rice?
Answer: The supply of rice will decrease as the farmer shifts resources to growing more wheat, which has become more profitable due to the price increase .
20. What is meant by price elasticity of supply?
Answer: Price elasticity of supply means the degree of responsiveness of supply of a commodity due to change in its price. It is measured as:
Price elasticity of supply = Percentage change in quantity supplied / Percentage change in price .
21. How is elasticity of supply measured?
Answer: Elasticity of supply is measured using the following formula:
Price elasticity of supply = Percentage change in quantity supplied / Percentage change in price .
22. Draw a supply curve with unitary elasticity.
Answer: A straight-line supply curve passing through the origin indicates unitary elasticity. This means the percentage change in quantity supplied equals the percentage change in price .
23. Price elasticity of supply of a good is 0.8. Is the supply ‘elastic’ or ‘inelastic’, and why?
Answer: The supply is inelastic because the value of price elasticity of supply is less than one .
Short Answer Type Questions
1. Distinguish between supply and stock.
Answer: Supply refers to the quantity of a commodity that producers are willing to offer for sale at different prices during a given period, while stock refers to the total quantity of a commodity available with the producers for sale at any given time.
2. State any three factors affecting supply of a commodity.
Answer:
- Price of the commodity: A higher price usually results in a greater quantity supplied.
- Prices of other related goods: The supply of a commodity may be influenced by changes in the prices of other goods, especially substitute products.
- State of technology: Technological advancements can reduce production costs and increase supply.
3. Explain how the supply of a commodity is affected by the prices of other related commodities. (or) Explain the effect of fall in prices of other goods on the supply of a given good.
Answer: The supply of a commodity is affected by the prices of other related commodities, particularly substitute goods. If the price of a related good (such as a substitute) increases, producers may shift their resources towards producing the more profitable good. This will reduce the supply of the given commodity. Conversely, if the price of a related good falls, producers will find it less profitable to produce that good and may increase the supply of the given commodity instead.
For example, if a farmer grows both wheat and rice, and the price of rice increases, the farmer may allocate more land to growing rice, thus reducing the supply of wheat. Similarly, if the price of rice falls, the farmer may decide to produce more wheat, increasing its supply.
4. Define market supply. What is the likely effect on the supply of a good if a unit tax is imposed on that good? Explain.
Answer: Market supply refers to the total quantity of a good that all producers in the market are willing to offer at various prices during a given period. If a unit tax is imposed on a good, the cost of production increases, leading to a decrease in supply as producers will offer less at the same price.
5. What is a supply schedule? What is the effect on the supply of a good when Government gives a subsidy on the production of that good? Explain.
Answer: A supply schedule is a table that shows the relationship between the price of a commodity and the quantity supplied. If the government provides a subsidy on the production of a good, it reduces the cost of production, which typically increases supply since producers are willing to supply more at the same price.
6. What is supply? How does the state of technology affect it? (or) Explain the role of technical progress as a determinant of firms supply curve.
Answer: Supply is the amount of a commodity that a seller (or a firm) is willing to sell in a market at a given price in a given period of time. Technological progress reduces the marginal cost of production, allowing firms to produce more with the same or fewer resources. This increase in efficiency shifts the supply curve to the right, indicating an increase in the quantity supplied at the same price.
7. Explain the effect of the following on supply of a commodity: (a) Fall in the prices of factor inputs (b) Rise in the prices of other commodities.
Answer: (a) Fall in the prices of factor inputs: A fall in the prices of factor inputs reduces the cost of production, making it more profitable for firms to supply more at the same price. This leads to an increase in supply, causing a rightward shift of the supply curve. (b) Rise in the prices of other commodities: A rise in the prices of other commodities can make their production more attractive to firms. As a result, firms may divert resources to produce these other commodities, reducing the supply of the current commodity and causing a leftward shift of the supply curve.
8. Explain the meaning of ‘increase in supply’, and increase in quantity supplied with the help of a schedule.
Answer: Increase in supply refers to a situation where the supply of a commodity rises due to a change in factors other than its own price. This results in a rightward shift of the supply curve. Increase in quantity supplied refers to a rise in the amount of a commodity offered for sale as a result of an increase in its own price, represented as a movement along the supply curve.
Example schedule:
| Price per unit (₹) | Quantity Supplied (Units) |
|---|---|
| 10 | 100 |
| 10 | 120 |
In the example, the quantity supplied increases from 100 units to 120 units without a change in price, indicating an increase in supply.
9. State any three causes of a leftward shift of supply curve? (or) State any three causes of decrease in supply.
Answer: Three causes of a leftward shift of the supply curve (decrease in supply) are:
- Increase in the price of inputs: When input costs rise, the cost of production increases, leading to a decrease in supply.
- Imposition of higher taxes: Higher taxes raise production costs, reducing the profitability and resulting in a decrease in supply.
- Adverse government policies: Government regulations or restrictions, such as trade barriers, can reduce the supply of a commodity.
10. Give three causes of an increase in the supply of a commodity? (or) State any three causes of a rightward shift of supply curve.
Answer: Three causes of an increase in the supply of a commodity (rightward shift of the supply curve) are:
- Improvement in technology: Technological advancements reduce production costs, allowing firms to supply more at the same price.
- Decrease in the price of inputs: When input prices fall, production becomes cheaper, leading to an increase in supply.
- Government subsidies: When the government provides subsidies, production costs decrease, encouraging firms to supply more at the same price.
11. Explain the effect of change in price of inputs used on the supply of a product.
Answer: A firm uses different inputs like raw materials, machines, etc., in its production process. If the prices of these inputs increase, then the profitability of the firm will fall. In such a case, the firm will supply less than before at the prevailing price level. On the other hand, if there is a fall in input prices, then the possibility to earn profit increases. So in that situation, the firm will be willing to supply more than before. Thus, changes in the prices of inputs influence the supply of a product in the market.
12. Explain the law of supply with the help of a supply schedule.
Answer: A supply schedule is a tabular statement showing various quantities which producers are willing to produce and sell at various alternative prices during a given period of time. It states the relationship between the price of a commodity and the quantity that would be supplied. The individual supply schedule for any product indicates different quantities supplied per period by the producer at different possible prices of that commodity.
Example:
| Price per unit (₹) | Quantity supplied of X per month (Units) |
|---|---|
| 2 | 20 |
| 3 | 40 |
| 4 | 60 |
| 5 | 80 |
| 6 | 100 |
This table clearly shows that more quantity of commodity X is being offered for sale as the price of the commodity increases and vice versa.
13. State the law of supply. What is meant by the assumption ‘others remaining the same’?
Answer: The law of supply states that, other things being equal, the quantity supplied of a commodity rises directly with its price. In other words, when the price of a commodity rises, the quantity supplied increases, and when the price falls, the quantity supplied decreases, other things remaining the same.
The assumption “others remaining the same” refers to the idea that all other factors affecting the supply, such as the prices of related goods, the state of technology, and the prices of inputs, remain unchanged.
14. What is meant by elasticity of supply? State the formula for measuring it.
Answer: Elasticity of supply refers to the degree of responsiveness of the quantity supplied to a change in the price of a product. It measures how much the quantity supplied of a commodity changes in response to a given percentage change in its price.
The formula for measuring elasticity of supply is:
Es = % change in quantity supplied / % change in price
Or,
Es = (ΔQ/Q) / (ΔP/P)
Where:
ΔQ = Change in quantity supplied
Q = Initial quantity supplied
ΔP = Change in price
P = Initial price
15. Draw straight line supply curves with price elasticity of supply:
(i) equal to one (ii) less than one (iii) more than one
Answer: (i) Equal to one: A straight-line supply curve passing through the origin represents unitary elasticity of supply. At all points along this curve, the percentage change in quantity supplied equals the percentage change in price.
(ii) Less than one: A steep straight-line supply curve that cuts the X-axis below the origin represents inelastic supply, where the percentage change in quantity supplied is less than the percentage change in price.
(iii) More than one: A flat straight-line supply curve that cuts the Y-axis above the origin represents elastic supply, where the percentage change in quantity supplied is greater than the percentage change in price.
Long Answer Type Questions
1. Explain any four determinants of the market supply of a commodity.
Answer:
- Commodity’s Own Price: Price of a commodity is the most important determinant of its supply. The higher the price, the larger will be the supply. The producers generally supply more quantity of a commodity at a higher price and vice-versa. This type of relationship between price and supply has been illustrated by the law of supply. At a higher price, the producer will be able to earn more profits and hence would be willing to sell more.
- Prices of Other Goods: The supply of a commodity also depends upon the prices of other goods. An increase in the prices of other goods makes their production more profitable for the producers. Therefore, they will increase their supply. On the other hand, the supply of the commodity the price of which has not changed will become relatively less profitable. The supply of such a commodity may decrease.
- Prices of Inputs: A firm uses different inputs like raw materials, machinery, etc., in its production process. If the prices of these inputs increase, then the profitability of the firm will fall. In such a case, the firm will supply less than before at the prevailing price level. On the other hand, if there is a fall in input prices, then the possibility to earn profit increases. So in that situation, the firm will be willing to supply more than before. Thus, changes in the prices of inputs influence the supply of a product in the market.
- State of Technology: If there is an improvement in production technology, then it may be possible for the firm to produce more with the given resources. In such a case, the average cost of production may fall and the firm may be willing to supply more at a given price. Hence, technological innovation plays a great role in raising the flow of supply of a product.
2. State and explain the law of supply with the help of a schedule and a diagram.
Answer: The law of supply states that other things being equal, the quantity supplied of a commodity rises directly with its price. In other words, when the price of a commodity rises, the quantity supplied increases, and vice versa, other things being equal. An important point to be noted here is that the relationship between price and quantity supplied is direct while the relationship between price and quantity demanded is inverse.
Supply Schedule: A supply schedule is a tabular statement showing various quantities that producers are willing to produce and sell at various alternative prices during a given period of time. It states the relationship between the price of a commodity and the quantity that would be supplied. The supply schedule is of two types:
- Individual Supply Schedule
- Market Supply Schedule
Example:
| Price per unit (₹) | Quantity supplied of X per month (Units) |
|---|---|
| 2 | 20 |
| 3 | 40 |
| 4 | 60 |
| 5 | 80 |
| 6 | 100 |
This table shows that as the price of the commodity increases from ₹2 to ₹6, the quantity supplied increases from 20 units to 100 units.
3. Distinguish between expansion of supply and increase in supply. Explain briefly.
Answer:
| Expansion of Supply | Increase in Supply |
|---|---|
| 1. It implies a change in quantity supplied due to a rise in the price of the commodity. | 1. It implies an increase in supply due to factors other than the price of the commodity. |
| 2. A movement along the supply curve indicates an expansion in supply. | 2. A rightward shift of the supply curve indicates an increase in supply. |
| 3. In this case, the supply curve remains unchanged, and the producer moves from one point to another along the same curve. | 3. In this case, the entire supply curve shifts to the right, implying that a greater quantity is supplied at each price. |
| 4. The supply increases as a result of a price increase for the same supply curve. | 4. The supply increases because of changes in factors like input prices, technology, etc. |
4. State the law of supply. What are the reasons for the upward slope of the curve?
Answer: The law of supply states that other things being equal, the quantity supplied of a commodity increases as the price increases, and decreases as the price decreases. In simple terms, there is a direct relationship between the price of a commodity and its quantity supplied.
Reasons for the upward slope of the supply curve:
- Profit Motive: As price increases, producers are motivated by the higher profits they can earn, thus increasing the quantity supplied.
- Law of Diminishing Marginal Returns: In the short run, as more units of a variable factor are employed to increase production, the additional output produced by the extra units falls, leading to an increase in marginal cost. As a result, producers supply more only at higher prices to cover the rising cost.
5. Distinguish between movements along a supply curve and shifts of the curve.
Answer:
| Movement along the Supply Curve | Shift of the Supply Curve |
|---|---|
| 1. It implies a change in quantity supplied due to a change in the commodity’s own price. | 1. It implies a change in supply (either an increase or a decrease in the supply) of a commodity at a given price. |
| 2. A movement from the left to the right along any supply curve indicates an expansion in quantity supplied due to an increase in the price of the commodity. | 2. A rightward shift of the supply curve implies an increase in supply at each possible price. |
| 3. A movement from the right to the left along the supply curve indicates a contraction in quantity supplied due to a fall in the price of the commodity. | 3. A leftward shift of the supply curve implies a decrease in supply at each possible price. |
| 4. Here, all other factors except the price of the commodity are assumed to remain unchanged. | 4. Here, given the price of the commodity, all other factors (such as input prices, technology, etc.) are assumed to be flexible. |
| 5. Here, the price of the commodity affects its quantity supplied. | 5. Here, supply affects the price. |
6. Explain any three causes of ‘Increase’ of supply of a commodity.
Answer: Three causes of an increase in supply are:
- Fall in input prices: When the prices of inputs used in the production of a commodity fall, the cost of production decreases, making it easier for producers to supply more of the commodity at the same price.
- Technological progress: Technological advancements can lead to more efficient production processes, reducing costs and enabling producers to increase the supply of the commodity.
- Government subsidies: When the government provides subsidies to producers, it reduces their cost of production, leading to an increase in supply as producers can offer more at the same or even lower prices.
7. Explain any two causes of ‘decrease’ in supply of a good.
Answer: Two causes of a decrease in supply are:
- Rise in input prices: An increase in the prices of inputs used in production raises the cost of production, causing producers to reduce the quantity they are willing to supply at the same price.
- Imposition of taxes: The imposition of taxes, such as excise or sales tax, increases the cost of production for producers, leading to a decrease in the quantity supplied at the same price.
8. Explain the distinction between change in quantity supplied and change in supply. Use diagram.
Answer:
- Change in quantity supplied: This refers to a movement along the same supply curve due to a change in the price of the commodity. When the price increases, there is an expansion in supply, and when the price decreases, there is a contraction in supply. This movement along the supply curve is caused only by a change in the commodity’s price, keeping other factors constant.
- Change in supply: This refers to a shift of the entire supply curve due to factors other than the commodity’s own price. An increase in supply is represented by a rightward shift of the supply curve, while a decrease in supply is shown as a leftward shift. The factors that can cause a shift in supply include changes in input prices, technological advancements, government policies, etc.
9. Define price elasticity of supply and explain its any two determinants.
Answer: Price elasticity of supply means the degree of responsiveness of supply of a commodity due to a change in its price. It is measured as:
Price elasticity of supply = (Percentage change in quantity supplied) / (Percentage change in price)
Two determinants of price elasticity of supply are:
- Nature of the commodity produced: Nature of the commodity is an important determinant of elasticity of supply. For instance, the supply of durable goods is relatively elastic. Durable goods can be stored and hence producers can meet their changing market demand by either running down their stocks or by building up stocks. On the other hand, the supply of perishable goods like milk, vegetables is relatively inelastic as these goods cannot be stored. Change in their supply has to be largely made through change in output only.
- Time period: Price elasticity of supply also depends upon the length of time for response. It may be difficult to change the quantity supplied in a few weeks or months in response to a price change but easy to do so over a period of a year. Therefore, supply tends to be relatively inelastic in the short period and relatively elastic in the long period.
10. Define price elasticity of supply. How can it be measured? Explain.
Answer: Price elasticity of supply is the degree of responsiveness of the quantity supplied of a commodity to a change in its price. It is calculated as:
Price elasticity of supply = (Percentage change in quantity supplied) / (Percentage change in price)
It can be measured using two methods:
- Percentage method: This method uses the formula mentioned above, where the percentage change in quantity supplied is divided by the percentage change in price.
- Geometric method: In this method, elasticity of supply is measured at a particular point on the supply curve by extending the supply curve to meet the axes. The price elasticity at any point is calculated as the ratio of the horizontal segment to the vertical segment between the point of intersection and the axes.
11. Explain the geometric methods of measuring elasticity of supply.
Answer: The geometric method of measuring elasticity of supply involves drawing a straight-line supply curve and determining elasticity at different points. The procedure is as follows:
- Zero elasticity: If the supply curve cuts the horizontal axis (quantity axis), the price elasticity of supply is less than one, meaning the supply is inelastic.
- Unitary elasticity: If the supply curve passes through the origin, the price elasticity of supply is equal to one, meaning that the percentage change in quantity supplied is equal to the percentage change in price.
- Infinite elasticity: If the supply curve intersects the vertical axis (price axis), the price elasticity of supply is greater than one, meaning the supply is elastic.
Numerical Questions
1. You are given the following information:
Price ( per unit) : 10 12 14 16 18 20
Supplied by Firm A (units) : 100 150 200 250 300 350
Supplied by Firm B (units) : 200 300 400 500 600 700
Assuming that there are only two firms in the market, compute market supply schedule.
Original Table:
| Price (per unit) | Supplied by Firm A (units) | Supplied by Firm B (units) |
|---|---|---|
| 10 | 100 | 200 |
| 12 | 150 | 300 |
| 14 | 200 | 400 |
| 16 | 250 | 500 |
| 18 | 300 | 600 |
| 20 | 350 | 700 |
Answer:
To calculate the market supply, we sum the quantities supplied by Firm A and Firm B for each price level:
For Price = 10: Market Supply = 100 (Firm A) + 200 (Firm B) = 300 units
For Price = 12: Market Supply = 150 (Firm A) + 300 (Firm B) = 450 units
For Price = 14: Market Supply = 200 (Firm A) + 400 (Firm B) = 600 units
For Price = 16: Market Supply = 250 (Firm A) + 500 (Firm B) = 750 units
For Price = 18: Market Supply = 300 (Firm A) + 600 (Firm B) = 900 units
For Price = 20: Market Supply = 350 (Firm A) + 700 (Firm B) = 1050 units
Updated Table:
| Price (per unit) | Supplied by Firm A (units) | Supplied by Firm B (units) | Market Supply (A+B) |
|---|---|---|---|
| 10 | 100 | 200 | 300 |
| 12 | 150 | 300 | 450 |
| 14 | 200 | 400 | 600 |
| 16 | 250 | 500 | 750 |
| 18 | 300 | 600 | 900 |
| 20 | 350 | 700 | 1050 |
15. When the price of a commodity is ₹10, the quantity supplied is 20 units. As price increases to ₹15, the quantity supplied increases to 30 units. Find out the elasticity of supply.
Answer: Elasticity of supply (e) is calculated using the formula:
e = (%Δ in supply) ÷ (%Δ in price)
Given:
Initial price (P₁) = ₹10,
Final price (P₂) = ₹15,
Initial quantity supplied (Q₁) = 20 units,
Final quantity supplied (Q₂) = 30 units.
%Δ in price = ((15 – 10) ÷ 10) × 100 = 50%,
%Δ in supply = ((30 – 20) ÷ 20) × 100 = 50%.
Now,
e = 50% ÷ 50% = 1.
The elasticity of supply is unitary elastic.
Extras
Additional MCQs
1. What is supply in economics defined as?
A. Desired quantity
B. Actual quantity
C. Fixed quantity
D. Unlimited quantity
Answer: A. Desired quantity
19. What happens in the case of inelastic supply?
A. Supply changes more than price
B. Supply changes less than price
C. Supply remains constant
D. Supply becomes perfectly elastic
Answer: B. Supply changes less than price
Additional questions and answers
1. What is the meaning of supply in economics?
Answer: Supply is the amount of a commodity that a seller (or a firm) is willing to sell in a market at a given price in a given period of time. Sellers may offer different quantities of a commodity for sale at different prices. Therefore, supply can also be defined as a schedule of quantities that will be offered for sale at various prices.
There are three important aspects of supply:
- Supply is a desired quantity, meaning how much producers are willing to sell, not how much they actually sell.
- Supply is always explained with reference to price. Like demand, the supply of a commodity is always at a price.
- Supply is a flow variable. It refers to the amount producers are willing to sell during a specific period of time, like per day, per week, or per year.
Economists distinguish between supply and quantity supplied. Supply refers to the set of quantities offered for sale at various prices, whereas quantity supplied refers to the specific quantity offered for sale at a certain price.
28. How does the nature of the commodity produced influence the elasticity of supply?
Answer: The nature of the commodity greatly affects its elasticity of supply:
- Durable goods: Their supply is relatively elastic because they can be stored. Producers can quickly adjust supply by altering their stock levels.
- Perishable goods: Their supply is relatively inelastic because they cannot be stored for long periods, and any change in supply has to come from changes in production.
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