Similar to demand, the concept of supply also is expressed as a relationship between price and quantity. Supply is a basic economic phenomenon that describes the total amount of a specific good or service that is available to consumers.
Concept of Supply
Supply refers to the quantity of a commodity that a firm is willing to offer for sale at a given price during a given period of time. The definition of supply highlights its four essential elements – quantity of a commodity, willingness to sell, price of the commodity and the period of time. Supply can be either for a single seller or for all the seller i.e. Individual Supply or Market supply.
Individual Supply refers to the quantity of a commodity that an individual firm is willing to offer for sale at a given price during a given period of time. Whereas, market supply refers to a quantity of a commodity that all the firms are willing to offer for sale at the given price during a given period of time.
Features of Supply
- The concept of supply is a desired quantity. It indicates only the willingness i.e. how much the firm is willing to sell and not how it actually sells.
- Supply of a commodity does not comprise the entire stock of the commodity. It indicates the quantity that the firm is willing to bring into the market at a particular price.
- Supply is always expressed with reference to price. The supply of a commodity is always at a price because with a change in price the quantity supplied may also change.
- Supply is always with respect to a period of time. The quantity of the commodity which the firm is willing to supply during a specific period of time.
Concept of Supply and Stock
The concept of supply is often confused with stock of the commodity. However, these terms have different meanings in economics. Stock is the total quantity of the commodity that is held by the firm at a particular point of time. On the other hand, supply is that portion of the stock of the commodity that the producer is willing to bring to the market for sale. Stock can never be less than supply. For example, if a seller has 50 tonnes sugar in his warehouse and he is willing to sell 30 tonnes @ rs. 37/kg, then the supply is 30 tonnes and the stock is 50 tonnes.
The concept of supply in economics is complex and has many mathematical formulas, practical applications and various factors affecting supply. Supply can refer to anything in demand that is sold in a competitive marketplace, but supply is most used to refer to goods, services, or labor.