same price or produce at a lower price, so the quantity supplied will increase with technological improvement. [8] Government policy - If the government decided to give subsidies to encourage certain product, then the quantity supplied will increase as the firms are able to produce at a cost of production. [8] Additionally, if the government wants more tax from such products like cigarette, the cost of production will rise and therefore will produce less. [8] Exceptions There can be exceptions for law of supply when there is prediction of the price will change in the future. When there is an expectation that the price will fall in near future, producers will prefer to sell in lower price to stimulate demand to rise. For example, perishable goods such as milk, the expiration date is very short, and therefore its supply is less dependent on price, these perishable goods’ supply quantity rather depends on the nature of its product. [11] Price Elasticity Quantity supplied by producer is decided by the price, if price goes up, more products are made, vice versa. Then the rate of increase in quantity supplied based on the change in price is Price Elasticity; how many quantities are produced more when unit price is increased. Equation describing the elasticity of supply will be: [12] Price Elasticity of Supply (PES) : [12] There are five categories to classify elasticity 1) Perfect Inelastic Supply (PES = 0) If the good has perfect inelastic supply, it means no matter how much the price goes up and down, the quantity of the product always remains the same. Example can be anything that has finite quantity and cannot be produce more such as famous art piece or limited-edition shoes. [12] 2) Relatively Inelastic Supply (0 < PES < 1) If the product has PES between 0 and 1, it means percentage change is price brings relatively smaller change of portion in quantity supplied. Example of this kind of products can be something that takes very long time to make it; if so, even the price goes up, producer will not be able to produce more right away easily such as nuclear power which requires construction, highly educated labours, long time etc. [12] 3) Unit Elastic Supply (PES = 1) When the good has unit elastic supply, it means when the price increase to twice, quantity doubles as well. [12] 4) Relatively Elastic Supply