Supply is a very useful tool in economics and when used in conjunction with demand can be used to predict and analyze market equilibrium. We will save our discussion of demand and market equilibrium for later chapters, for now let us look at supply in more depth.
From the perspective of a consumer (an individual, customer, purchaser or buyer), supply reflects the availability of products that you can purchase. Modern companies spend lots of time each year analyzing the supply for goods that must be purchased for use in their business as well as their competitors supply and take this into account when making business decisions. From the perspective of a producer (a business, firm, seller or supplier), supply reflects your desire and ability to provide products or services.
Supply represents the minimum quantity of a particular good that producers are willing and able to sell during a specified time period. The fundamental character of the concept of supply is the relationship between the price of a good and the minimum quantity that is supplied and is described by the Law of Supply.
The The Law of Supply states that as the price of a good increases the quantity supplied increases. And the opposite is also true, as the price of a good decreases the quantity supplied decreases. This makes sense intuitively since firms would likely be more willing to sell more of a good for more money rather than less of it.
There are a variety of factors that influence supply for a good and there are several ways that supply can be represented.
Click on each of the following sections for a more detailed discussion:
How supply is Represented