Supply in Economics Explained Easy with Example
Supply is a most fundamental term in economics, which defines the total amount of goods and services available to customers.
Supply can refer to anything in demand sold in a competitive marketplace; it is mostly used to refer to goods, services, or labor.
In other words, it is related to the amount existing at a specific price or amount existing across a range of prices if displayed on the graph. Firms look forward to maximizing their profits when the price increased due to a rise in suppply. It means whenever the price of goods in the economy rises, the supplyy would automatically rise, and companies would take it as an opportunity to get maximum profit.
Clarification of Supply in Economics
The trend of suppli and demand is based on the modern economy. Each good and services have its own supplyy and demand arrangements based on price.
When a people demand good, which is for he willing to pay even more for it, the producer will increase its ssupply because the purchaser is willing to pay more for that specific good. As the supplyy increases, the price will fall given the same level of demand.
The supply increases, the price will fall, given the same level of demand. An ideal market will touch a point of equilibrium where the supply equals the demand. For example, no excess of supply and no shortage of supply, for a given price.
Factors Affecting the Supply
It is further relevant to mention here that one of the most important factors that a good’s price is being affected by supply. Usually, if a good’s price rises, so will the suppply. The price of related goods and the price of inputs such as raw materials, energy, etc., also affect supplyy as they increase the total price of the goods sold.
The production of items is also a significant factor in affecting the supplyy. When technology advances, the quality of goods being supplied, or troublesome innovation, like when a technological development renders a good outdated or less in demand.
Government regulations may also affect the supply, such as market expectations, market suppliers competition and environmental law, etc.
In the case of environmental law, the extraction of Coal, Oil, and other minerals which are hazardous to the environment affect the supply of coal, oil, etc.
If you have any queries regarding this post, do comment on this post, and please do not forget to share this post with your friends.