Suggest a new Definition
Proposed definitions will be considered for inclusion in the Economictimes.com
Economy
- PREV DEFINITIONSunk Cost DilemmaSunk costs are irrecoverable costs that have already been incurred and are independent of any happenings in the future.Read More
- NEXT DEFINITIONTender periodTender period gives members of the contract the flexibility to make decisions till the time the contract expires.Read More
What is 'Supply'
Supply
The fundamental economic concept that states the total amount of a specified product or service that is available to customers is known as ‘supply.’ It is very closely related to and goes hand in hand with demand. When supply exceeds demand for a product or service, the prices of said product fall. This is known as the law of supply and demand. Their relationship highly affects the price of goods and is a very important topic in the field of economics.
What is Supply?
Supply is related to the price of the products, given that there is an incentive to supply at a higher price, as higher prices produce greater revenue and profits. Companies always want profit and, therefore, are more likely to manufacture more products at higher prices. When the price of goods or services is low, the supply is low, and when the price is high, the supply is also high. Therefore, significant price changes would also affect the equilibrium in the economic market.
Understanding Supply
The supply and demand relationship forms a solid basis for modern economics. Every product or service has its supply and demand in the market. Therefore, those products also have supply and demand patterns based on cost, utility, and preference. For example, suppose there is a significant demand for a particular good, making people willing to buy the product at a higher price. In that case, the companies will work to increase the supply. As soon as there is a high increase in supply, we see the prices fall if the demand remains the same. In an ideal case, the economic market will reach an equilibrium point where supply becomes equal to demand at a certain price. At this specific point of equilibrium, company profit becomes maximized.
As long as the equilibrium point is maintained, manufacturers keep maximizing profits, and customers maximize utility. Any push in supplies in the market will lead to companies losing profit and therefore reduce supply. This will lead to a fall in prices until an equilibrium is reached again at some point.
There are a few factors of supply for goods and services. These factors are:
Basics of Supply
The basics of supply have their foundations in mathematical formulas and their applications. Even though anything in demand and is sold in the economic market is called supply, the term is generally used for products, goods, and services. The most important factor for supply is the price of the product. If a product’s price increases, the supply of the product will also increase. The price of related goods and input prices like energy cost, cost of raw materials, and labour also increase the product's total selling price.
The conditions of the production of the goods of supply are also important. Government regulations and policies like environmental laws, labour laws and market policies also play an important role in affecting supply. These lead to a change in the number of suppliers and expectations in the economic market.
In microeconomics, the supply equation and its respective function show the relationship between supply and the factors that affect it. For example, a supply curve expresses the relationship between the prices of a product and the quantity of the supplied product.
The law of supply and demand, which is one of the fundamentals in economics, describes the interaction between the supply of goods by firms and consumer demand. These principles help us determine suppliers' reactions to price and demand change and how that affects the overall economic market.
The various types of supply are:
Short-term supply: The ability of consumers to buy products is restricted by available supplies. They cannot buy beyond the supplied goods.
Long-term supply: The factor of availability of time when demand changes which gives the supplier a way to adjust to the quick change in demand.
Joint supply: The supply of products produced and sold jointly.
Composite supply: The supply of a product through its different sources, where the product serves more than one purpose.
Market supply: The overall desire and capability of suppliers to supply the market with specific products regularly.
Can you give an example of supply in economics?
The concept of “supply” in economics can be easily explained with the help of an example. Suppose, at Rs. 100, a fruit supplier supplies five apples. At Rs. 90, the supplier will supply just four apples. At Rs. 80, the supplier will supply three apples and so on. This shows that the fall in the price of apples decreases the supply of the same and vice versa.
Why is supply important?
Supply is essential because it ensures that enough goods are produced so that the consumer demand for those goods is maintained. Usually, if supply is lower than demand, the price of that commodity will increase. This supply schedule or curve determines how much of a good is produced at a certain price level.
How does supply affect a business?
Supply helps a business to ensure that a certain number of their produced companies are made available to the market at different price levels to meet the needs of consumer demand. If there is an oversupply, the price of that product will decrease. If there is an under-supply, the price of that product will increase. Supply affects the profit margin of a business.
Disclaimer: This content is authored by an external agency. The views expressed here are that of the respective authors/ entities and do not represent the views of Economic Times (ET). ET does not guarantee, vouch for or endorse any of its contents nor is responsible for them in any manner whatsoever. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified. ET hereby disclaims any and all warranties, express or implied, relating to the report and any content therein.
The fundamental economic concept that states the total amount of a specified product or service that is available to customers is known as ‘supply.’ It is very closely related to and goes hand in hand with demand. When supply exceeds demand for a product or service, the prices of said product fall. This is known as the law of supply and demand. Their relationship highly affects the price of goods and is a very important topic in the field of economics.
What is Supply?
Supply is related to the price of the products, given that there is an incentive to supply at a higher price, as higher prices produce greater revenue and profits. Companies always want profit and, therefore, are more likely to manufacture more products at higher prices. When the price of goods or services is low, the supply is low, and when the price is high, the supply is also high. Therefore, significant price changes would also affect the equilibrium in the economic market.
Understanding Supply
The supply and demand relationship forms a solid basis for modern economics. Every product or service has its supply and demand in the market. Therefore, those products also have supply and demand patterns based on cost, utility, and preference. For example, suppose there is a significant demand for a particular good, making people willing to buy the product at a higher price. In that case, the companies will work to increase the supply. As soon as there is a high increase in supply, we see the prices fall if the demand remains the same. In an ideal case, the economic market will reach an equilibrium point where supply becomes equal to demand at a certain price. At this specific point of equilibrium, company profit becomes maximized.
As long as the equilibrium point is maintained, manufacturers keep maximizing profits, and customers maximize utility. Any push in supplies in the market will lead to companies losing profit and therefore reduce supply. This will lead to a fall in prices until an equilibrium is reached again at some point.
There are a few factors of supply for goods and services. These factors are:
- Price of goods or service
- Price of production
- Price of Input
- Production units’ number
- Technology of production
- Producer expectation
- Policies of Government
Basics of Supply
The basics of supply have their foundations in mathematical formulas and their applications. Even though anything in demand and is sold in the economic market is called supply, the term is generally used for products, goods, and services. The most important factor for supply is the price of the product. If a product’s price increases, the supply of the product will also increase. The price of related goods and input prices like energy cost, cost of raw materials, and labour also increase the product's total selling price.
The conditions of the production of the goods of supply are also important. Government regulations and policies like environmental laws, labour laws and market policies also play an important role in affecting supply. These lead to a change in the number of suppliers and expectations in the economic market.
In microeconomics, the supply equation and its respective function show the relationship between supply and the factors that affect it. For example, a supply curve expresses the relationship between the prices of a product and the quantity of the supplied product.
The law of supply and demand, which is one of the fundamentals in economics, describes the interaction between the supply of goods by firms and consumer demand. These principles help us determine suppliers' reactions to price and demand change and how that affects the overall economic market.
The various types of supply are:
Short-term supply: The ability of consumers to buy products is restricted by available supplies. They cannot buy beyond the supplied goods.
Long-term supply: The factor of availability of time when demand changes which gives the supplier a way to adjust to the quick change in demand.
Joint supply: The supply of products produced and sold jointly.
Composite supply: The supply of a product through its different sources, where the product serves more than one purpose.
Market supply: The overall desire and capability of suppliers to supply the market with specific products regularly.
Can you give an example of supply in economics?
The concept of “supply” in economics can be easily explained with the help of an example. Suppose, at Rs. 100, a fruit supplier supplies five apples. At Rs. 90, the supplier will supply just four apples. At Rs. 80, the supplier will supply three apples and so on. This shows that the fall in the price of apples decreases the supply of the same and vice versa.
Why is supply important?
Supply is essential because it ensures that enough goods are produced so that the consumer demand for those goods is maintained. Usually, if supply is lower than demand, the price of that commodity will increase. This supply schedule or curve determines how much of a good is produced at a certain price level.
How does supply affect a business?
Supply helps a business to ensure that a certain number of their produced companies are made available to the market at different price levels to meet the needs of consumer demand. If there is an oversupply, the price of that product will decrease. If there is an under-supply, the price of that product will increase. Supply affects the profit margin of a business.
Disclaimer: This content is authored by an external agency. The views expressed here are that of the respective authors/ entities and do not represent the views of Economic Times (ET). ET does not guarantee, vouch for or endorse any of its contents nor is responsible for them in any manner whatsoever. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified. ET hereby disclaims any and all warranties, express or implied, relating to the report and any content therein.
- PREV DEFINITIONSunk Cost DilemmaSunk costs are irrecoverable costs that have already been incurred and are independent of any happenings in the future.Read More
- NEXT DEFINITIONTender periodTender period gives members of the contract the flexibility to make decisions till the time the contract expires.Read More
Related News
Grip Invest launches India's first privately placed investment grade bonds with Rs 10,000 face value, offering 14% yieldIndia's first privately placed investment grade bonds with a face value of Rs. 10,000 have been launched by Grip Invest with a tenure of 17 months.
Ecos Mobility offers exposure to fast growing car rental business in the countryEcos (India) Mobility and Hospitality, a provider of corporate car rental services, plans to raise ₹601 crore through an offer for sale by promoters, which will reduce their stake from 98% to 68%. The company has access to over 12,500 vehicles, ranging from economy to luxury cars, but only 6% of the fleet is owned by the company.
India, US sign def pact for security of supplies; selecting cos next stepIndia and the US signed a Security of Supply Arrangement to prioritize defense equipment supply, addressing urgent security needs. Discussing defense cooperation, Rajnath Singh and Lloyd Austin focused on industrial collaboration and regional security. The deal seeks to boost supply chain resilience and open business opportunities for Indian firms. A Reciprocal Defence Procurement Agreement is also in the works.
High rates food for thought, but inflation on Governor Das' plateThe views in India's Monetary Policy Committee have become louder with outgoing members Ashima Goyal and J R Varma warning about the risks of a 'higher-for-longer' interest rate approach to economic growth. Both members voted for a repo rate cut, citing concerns over excessive monetary tightening's impact on growth.
High rates food for thought, but inflation on Governor Das' plateThe views in India's Monetary Policy Committee have become louder with outgoing members Ashima Goyal and J R Varma warning about the risks of a 'higher-for-longer' interest rate approach to economic growth. Both members voted for a repo rate cut, citing concerns over excessive monetary tightening's impact on growth.
Rupee strengthens by nearly 0.1% since last close, ends at 83.79 vs US dollarThe Indian rupee strengthened versus the US dollar, closing at 83.7925 per US dollar on Tuesday due to a weaker dollar index and inflows in local stocks and bonds. A fall in crude oil prices also aided the local currency.
Antfin Singapore sells Zomato shares worth Rs 4,771 crore via block dealsAntfin Singapore Holding sold Zomato shares worth Rs 4,771 crore on Tuesday through two block deals. Over 18.54 crore shares were sold at a premium over the floor price. The final stock price closed at Rs 263.20 on the NSE.
Oil slips with Brent staying below $80 on China demand concernsOil eased on Monday, with global benchmark Brent holding below $80 a barrel, as concern over demand in top oil importer China weighed on market sentiment, offsetting risks to supply in the Middle East.
Recession has its own losers & even winners: 5 stocks from pipes and wire sector with upside potential of up to 44%Whether it comes or not, but the fact is that since the first week of August, there has been a talk of possible recession in the US. The first reaction was that of panic and then as usual, across the globe a trade got in motion to sell possible stocks and sectors which are going to get hit. There is enough evidence to show that if there is a recession then it is the metal sector stocks which get the hit first as the metal prices tend to come down. Already if one looks at performance of the metal stocks, they have under performed in the last two weeks. Now there is an inverse relationship between the falling price of metal and margins of the many user industries. So, while metal prices come down, metal stock gets hit, there is another set of companies which might end up gaining, in terms of margins and better bottomline. Given the fact that some of these companies have strong brands they should be on watch list for a possible short term tactical investing if and when the word “ R” is heard back on the street.
Mars to acquire Pringles maker Kellanova for nearly $36 bnM&M's and Snickers maker Mars said Wednesday that it would acquire snack food business Kellanova, marking a multibillion dollar agreement set to result in a new industry giant. This would bring two new billion-dollar brands, Pringles and Cheez-It, into its business.
Load More
