What is supply?
Supply is defined as an economic term which refers to the quantity of a particular product or service that suppliers offer to consumers at a specified price at a certain period of time.
Supply is a fundamental economic concept. It represents the total amount of certain goods available to consumers. The notion of supply is closely related to the concept of demand: supply tend to increase if the price goes up because companies want to expand their production to meet the increasing demand.
Where have you heard about supply?
The concept of supply is rather complex and can be defined via math formulas and numerous contributing factors. Supply is a characteristic attributable to anything in demand in a competitive market. However, it is most often used in relation to goods, services and labour.
The law of supply and demand is another fundamental economics principle. Simply put, when supply is high and demand is low, the price will also stay low; when supply is low and demand is high — the price will increase.
In modern economics, supply and demand have been historically conceptualised by John Locke and used by Adam Smith in his famous “An inquiry into the Nature of the Wealth of Nations” published in 1776. Graphically, the supply curve was first represented in 1870. Later on, in 1890, it was popularised by Alfred Marshall in his “Principles of Economics”.
What you need to know about supply.
In other words, when the price of a particular product is low, the supply also tends low. When the price is high, the supply increases with it. This is because companies are always looking to gain more profit. Therefore, they are more likely to offer products at a higher price.
There are several factors affecting the supply of any given product, including:
The price of the product itself
The price of related goods and services
The production cost
The price of inputs
The quantity of production units
The technology behind the production process
The producers’ expectations
Natural and other factors
Suppliers try to forecast and anticipate changes in price and quickly react to changes in demand. However, not all market factors are easy to predict. For example, the yield of commodities can’t be calculated precisely, though it still affects prices.
The supply curve is usually plotted graphically with the quantity — the dependent variable — depicted horizontally, and the price — the independent variable — depicted vertically.
What does supply mean? In a goods market, supply represents the amount of product per unit of time that producers are going to sell at various prices.
In the labour market, supply means the amount of time per week (or month) a person is willing to spend working, as a function of the wage rate.
In financial markets, the money supply represents the volume of liquid assets available in the market, determined and affected by the country's monetary policy.