Law of supply:
“When all other factors affecting supply are assumed to be constant, as price increases, supply expands and as price decreases, supply contracts”. The definition tells that there is a direct and positive relationship between price and supply. This relationship is called law of supply.

Assumptions of law of supply:

• Over and above time, several factors affect the supply of a good at a particular point of time. However, at given point of time, the law of supply assumes the effect of all factors on supply other than the price as constant.
• In reality, other than price there are some other factors that can influence the supply more. However, we assume these to be constant.

Some important assumptions of law of supply:

• Prices of factors of production remain constant.
• There is no change in technology.
• Level of competition remains the same. In other words, number of sellers in the market remains the same.
• Expectations regarding future prices are ignored/held constant.
• Other factors like government policy, transport facilities, natural factors, etc. remain constant.