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Assumptions of Law of Supply

(i) Nature of Goods. If the goods are perishable in nature then the saler cannot wait for the rise in price. Seller may have to offer all of his goods at a current market price because he may not take risk of getting this commodity perished.

(ii) Government policies. Government may enforce the firms and producers to offer production at prevailing market price. In such a situation producer may not be able to wait for the rise in price.

(iii) Alternative Products. If a number of alternative products are available in the market then customers tend to buy those products to fulfill their needs, the producer will have to shift to transform his resources to the production of those products.

(iv) Squeeze in Profit. Production costs like raw materials, labor costs, overhead costs and selling and administration may increase along with the increase in price. Such situations may not allow producer to sell his products at a particular higher price.