What causes a downward movement along a supply curve of a commodity?
Downward movement along the supply curve implies contraction of the quantity supplied. Contraction of supply refers to the fall in supply due to fall in price of good, when all other factors of supply remain constant.
Px = Price of commodity x
Py = Price of related goods (Substitutes or complementary goods)
Pi = Price of inputs, raw materials or cost of production
T = State of technology
G = Govt. Policy
GF = Goal of firm
NF = Natural factors
there are assuptions to law of supply like.
- [price]..when price falls supply falls
- [speculation]if a buyer wish to more increse in price so that he may get more profit by selling it so today he will not buy more and hence supply curve will slope downward.
- urgent need of cash]] when a buyer need urgent cash he will sell more at low price and hence he supply curve will go downward.