Stock refers to the entire quantity of a commodity that is in the custody of the seller. So it is the potential supply.
Supply refers to the quantity of a commodity offered for sale at a given price and at a given time and place.
Stock depends on the production.
Supply depends on stock and price.
Stock can be greater than the supply.
(a) For perishable commodities the stock and the supply can be the same.
(b) For durable commodities, the stock can be more than the supply.
Supply cannot be greater than the stock.
Supply is either equal or less than the stock.
Order of existence
Stock comes before supply
Supply follows stock there cannot be supply without stock.
2. Expansion of Supply and Increase in Supply
Expansion of Supply
Increase in Supply
Expansion of supply refers to a rise in the quantity supplied due to a rise in the price of a commodity, other factors remaining constant.
Increase in supply refers to rise in the supply of a given commodity due to favourable changes in other factors such as fall in the price of inputs, fall in tax rates, technological upgradation etc., while price remains constant.
Expansion in supply leads to an upward movement on the same supply curve due to a rise in price.
The supply curve shifts to the right of the original supply curve.
3. Contraction of Supply and Decrease in Supply
Contraction of Supply
Decrease in Supply
Contraction of supply refers to a fall in the quantity supplied, due to fall in the price of a commodity, other factors remaining constant.
Decrease in supply refers to a fall in the supply of a given commodity due to unfavourable changes in other factors.
In case of contraction of supply, there is a downward movement on the same supply curve.
The supply curve shifts to the left of the original supply curve.
4. Average revenue and Average cost.
Average Revenue (AR) refers to total revenue per unit of output sold.
Average Cost (AC) refers to total cost of production per unit.
It is obtained by dividing the total revenue by the number of units sold.
It is calculated by dividing total cost by total quantity of production.
It is calculated as : Average Revenue = Total Revenue/Quantity
It is calculated as :Average Cost = Total cost/Total Quantity Output