(i) Law of supply is associated with production analysis.
(ii) It explains the positive (or) direct relationship between Price and Quantity supply.

Economies are broadly divided into two types. They are,
(1) Internal Economies of scale
(2) External Economies of scale

(i) Firms will supply less at lower prices and more at higher prices.
(ii) As price of the commodity increases, the amount supplied also increases.
(iii) So, supply curve has a positive slope from left to right.

(i) Iso-cost line represents a combination of inputs which show the same amount of cost.
(ii) It gives information on factor prices and financial resources of the firm.

Labour represents services provided by the factor labour, which helps in yielding an income to the owner of the labour power. - Marshall.

Basis for comparison	Short - run production function	Long - run production function
Meaning	Short run production function alludes to the time period in which at least one factor of production is fixed	Long run production function connotes the time period in which all the factors of production are variable.
Law	Law of variable proportions	Law of returns to scale.
Scale of production	No change in scale of production.	change in scale of production
Factor - ratio	Changes	Does not change
Entry and exit	There are barriers to entry and the firms can shut down but cannot fully exit.	Firms are free to enter and exit

(i) Division of labour means dividing the process of production into distinct and several component process and assigning each component in the hands of a labour or a set of labourers, who are specialists in that particular process.
(ii) For Example: A tailor stitches maximum of four shirt a day in the case of garment exports firm, it may stitch more than 100 shirts a day

(i) Charles Cobb and Paul Douglas have given a linear homogeneous production function.
(ii) A proportionate increase in the factors leads to a proportionate increase in output.
(iii) There is constant returns to scale with only labour and capital.
(iv) The elasticity of substitution between the factors is one.
Q = AL^{\(\alpha \)}K^{\(\beta \)}
Q = output; A = positive constant; K = Capital; L = Labour, \(\alpha \) + \(\beta \) = 1

(i) Elasticity of supply is the degree of responsiveness of change in supply to change in price on the part of sellers.
(ii) There are 5 types of elasticity of supply:
1. Relatively elastic supply
2. Relatively inelastic supply
3. Unitary elastic supply
4. Perfectly elastic supply
5. Perfectly inelastic supply
(iii) The factors governing elasticity of supply are the nature of the commodity, cost of production, technical condition & time factor.

Initiation: He considers the situation and availability of resources and plans the process of production.
Innovation: He introduces new methods in the production process.
Co-ordination: He uses a particular combination of the factors of production.
Control, direction & supervision: He directs the factors to get better results and supervises for the efficient functioning of all factors.
Risk taking, uncertainty bearing: Risk is insured, uncertainties cannot be insured.

The Iso-cost line: The iso-cost line is an important component in analysing producer's behaviour. The iso-cost line represents different combinations of inputs which shows the same amount of cost. The iso-cost line gives information on factor prices and financial resources of the firm. It is otherwise called as "lso-price line" or "iso-income line" or "iso-expenditure line" or "total outlay curve".
Suppose that a producer has a total budget of H₂O and for producing a certain level of output, he has to spend this amount on two factors Labour (L) and Capital (K). Prices of factors K is no and L is HO. Iso Cost Curve can be drawn by using the following hypothetical table.

The Iso-Cost
Combination	Units of Capital Price = Rs 30	Units of Labour Price = Rs 10	Total Expenditure( in Rupees)
A	4	0	120
B	3	3	120
C	2	6	120
D	1	9	120
E	0	12	120

As shown in Table, there are five combinations of capital and labour such as combination A represents 4 units of capital and zero units of labour and this combination costs Rs 120.
Similarly other combinations (B, C, D and E) cost same amount of rupees (Rs 120).

Symbolically,
4K + OL = Rs.120
3K + 3 = Rs.120
2K + 6L = Rs.120
lK + 9L = Rs.120, and
OK + 12L = Rs.120.
Thus, all the combinations A, B, C, D and E cost the same total expenditure.
From the figure it is shown that the costs to be incurred on capital and labour are represented by the triangle OAE. The line AE is called as Iso-cost line.

There are five types of elasticity supply. There are,
(1) Relative Elastic Supply: (ES> 1)
(i) The co-efficient of elastic supply is greater than 1 (ES> 1)
(ii) A unit change in the price causes more than one percent change in quantity supply of the commodity.

(2) Unitary Elastic Supply: (ES = 1)
(i) The co-efficient of elastic supply is equal to one (ES = 1)
(ii) A unit change in the price causes an equal change in quantity supply is called elastic supply.

(3) Relatively Inelastic Supply: (ES < 1)
(i) The co-efficient of elasticity is less than one (ES < 1)
(ii) A unit change in the price causes and less than one percent change in the quantity supply.

(4) Perfectly Inelastic Supply: (ES = 0) .
(i) The co-efficient of elasticity is equal to zero (ES = 0)
(ii) A unit change in the price causes no change in the quantity supply.

(5) Perfectly elastic supply: (ES= =)
(i) The co-efficient of elasticity of supply is infinity (ES = DC)
(ii) A unit change in the price causes an infinite change in the quantity supply.

Introduction:
In the long run there is no difference between fixed factor and variable factor.
Meaning:
The laws of returns to scale explain the relationship between output and the scale of inputs in the long run when all the inputs are increased in the same proportion.
Assumptions:
1. All the factors of production are variable except organisation.
2. There is no change in technology.
3. There is perfect competition.
4. Output is measured in physical quantities.
Increasing returns to scale:
If all inputs are increased by 1 %, output increases by more than 1 %.
Constant returns to scale:
lf all inputs are increased by 1%, output increases exactly by 1 %.
Diminishing returns to scale:
If all inputs are increased by 1 %, output increases by less than 1 %.
Explanation:
a) The movement from point a to b shows increasing returns to scale. When 2 units labour and capital are used the output has increased from IQ₁ to IQ₃.
b) The movement from b to c shows constant returns. When 4 units of labour and capital are used (i.e. double) the output also has doubled from IQ₃ to IQ₆.
c) The movement from c to d shows decreasing returns. The doubling of the factors from 4 units to 8 units has produced less increase in output i.e. from IQ₆ to only IQ₈
Stages input Output returns to Scale a to b 100% ↑ 200% ↑ increasing b to c 100% ↑ 100% ↑ Constant c to d 100% ↑ 33.33% ↑ decreasing

Iso and quant are derived from the Greek language, meaning 'equal' and 'quantity'.
Definition:
Isoquant curve is a locus of points representing various combinations of two inputs capital and labour yielding the same output. It is also called equal product curve or product indifference curve.
Properties:
1. The isoquant curve has negative slope:
(i) Capital is being substituted by labour.
(ii) Isoquant has negative slope because of diminishing MRTS.
(iii) Constant MRTS (straight line) and increasing MRTS (concave) are also possible.
(iv) It depends on the nature of isoquant curve

2. Isoquant curve is convex to origin:
The capital substituted per unit of labour goes on decreasing so the isoquant is convex to the origin.

3. Isoquant curves cannot intersect each other:
Point A lies on IQ₁ and IQ₂, Point C lies on IQ₂, showing higher output Point B
lies on IQ₁, showing lower output. C = A, B = A But C > B.


4. Upper isoquant curve represents a higher level of output:
Higher IQ₂ shows higher output 200 units. Lower IQ₁ shows lower output 100 units. IQ₂ means the use of more sectors than IQ₁. Arrow shows increase in output with a right and upward shift of an isoquant curve.

5. Isoquant curve does not touch either x axis or y axis:
In IQ₂ only capital is used and in IQ₁ only labour is used.

Conclusion:
These are the properties of isoquant curves.