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Supply

Supply is an important economic term that denotes the amount of available goods and services in a country. The term is closely related to the term demand; both demand and supply determine the price of a particular goods and services.

There is an inverse relationship between supply and prices. All factors being equal, an increase in supply of goods results in decrease in the prices and vice versa. Equilibrium prices are achieved at the point where the supply of good is equal to the demand. If the demand is greater than the supply, the price of good will increase, while if the demand is less than the supply, the price of goods falls.

Explanation of the term 'Supply'

Supply patterns in context of an economy differs for every good and services, and is based on such factors as utility, price, and customer tastes. The optimum utility, price, and profits are achieved at the equilibrium prices where the demand equals the price.

Supply concept has different applications in the economy. Apart from affecting the price of a good or service, the general level of supply in a country impacts the economy of the country. If the supply of goods and services does not match the demand, inflation level will increase in a country. In case the supply of goods is greater than the demand, it will result in deflation. Ideally, both the demand and supply of goods should be equal, which would result in zero inflation. However, this does not happen in the real world.

In developed countries the supply and demand levels are such that it results in + 2% inflation rate. On the contrary, in less developed economies the supply level tends to be much lower than the demand. As a result the inflation rate amount to in double digits.

Increase in supply that is in line with the demand generally contributes to economic growth. There a number of factors that can help in improving supply of goods in a country. For instance, technological advancements that leads to reduced production costs or improved productivity helps in increasing the supply level in a country. Other factors that play a part in improving general supply levels in a country include transport infrastructure, utilities, labor costs, and government incentives.


Further Reading


Supply chain finance: a literature review
re.public.polimi.it [PDF]
… Chain Management: an international Journal, Journal of Business and Finance, Journal of Finance, Management Science, International Journal of Production Economics, Journal of Business Logistics, Journal of Supply Chain Management …

Does finance solve the supply chain financing problem?Does finance solve the supply chain financing problem?
www.emerald.com [PDF]
… Chain Management: an international Journal, Journal of Business and Finance, Journal of Finance, Management Science, International Journal of Production Economics, Journal of Business Logistics, Journal of Supply Chain Management …

Food and finance: The financial transformation of agro-food supply chainsFood and finance: The financial transformation of agro-food supply chains
www.tandfonline.com [PDF]
… Chain Management: an international Journal, Journal of Business and Finance, Journal of Finance, Management Science, International Journal of Production Economics, Journal of Business Logistics, Journal of Supply Chain Management …

An empirical investigation between money supply government expenditure, output & prices: The Pakistan evidenceAn empirical investigation between money supply government expenditure, output & prices: The Pakistan evidence
papers.ssrn.com [PDF]
… Chain Management: an international Journal, Journal of Business and Finance, Journal of Finance, Management Science, International Journal of Production Economics, Journal of Business Logistics, Journal of Supply Chain Management …

Short-term financing in a cash-constrained supply chainShort-term financing in a cash-constrained supply chain
www.sciencedirect.com [PDF]
… Chain Management: an international Journal, Journal of Business and Finance, Journal of Finance, Management Science, International Journal of Production Economics, Journal of Business Logistics, Journal of Supply Chain Management …

Supply chain finance: applying finance theory to supply chain management to enhance finance in supply chainsSupply chain finance: applying finance theory to supply chain management to enhance finance in supply chains
www.tandfonline.com [PDF]
… Chain Management: an international Journal, Journal of Business and Finance, Journal of Finance, Management Science, International Journal of Production Economics, Journal of Business Logistics, Journal of Supply Chain Management …

Supply chain finance: A systematic literature review and bibliometric analysisSupply chain finance: A systematic literature review and bibliometric analysis
www.sciencedirect.com [PDF]
… Chain Management: an international Journal, Journal of Business and Finance, Journal of Finance, Management Science, International Journal of Production Economics, Journal of Business Logistics, Journal of Supply Chain Management …

Effects of fiscal deficit and money M2 supply on inflation: Evidence from selected economies of AsiaEffects of fiscal deficit and money M2 supply on inflation: Evidence from selected economies of Asia
papers.ssrn.com [PDF]
… Chain Management: an international Journal, Journal of Business and Finance, Journal of Finance, Management Science, International Journal of Production Economics, Journal of Business Logistics, Journal of Supply Chain Management …

Research on Supply Chain Financing Service <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-WLJS200510054.htm' />Research on Supply Chain Financing Service [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-WLJS200510054.htm'>PDF]
… Chain Management: an international Journal, Journal of Business and Finance, Journal of Finance, Management Science, International Journal of Production Economics, Journal of Business Logistics, Journal of Supply Chain Management …

The demand and supply of external finance for innovative firmsThe demand and supply of external finance for innovative firms
academic.oup.com [PDF]
… Chain Management: an international Journal, Journal of Business and Finance, Journal of Finance, Management Science, International Journal of Production Economics, Journal of Business Logistics, Journal of Supply Chain Management …



Q&A About Supply


What does supply represent?

Supply represents the amount of a resource that firms, producers, labourers, providers of financial assets or other economic agents are willing and able to provide to the marketplace.

What happens when there is a decrease in supply of goods?

Prices increase.

How do supply and demand affect prices?

The inverse relationship between supply and prices means that when one goes up, the other goes down.

What happens when there is an increase in supply of goods?

Prices decrease.

How do you determine supply for different products?

You can determine supply by looking at how much product producers are willing to sell at various prices.

What is demand?

Demand is an important economic term that denotes the amount of goods or services people are willing to buy at a specific price.

How does equilibrium occur on the market for good or service?

Equilibrium occurs where demand equals price. When this happens, utility, profits, and prices are optimal for both buyers and sellers involved in the market transaction.

In what ways can general levels of supply impact economies across countries ?

General level of supplies impacts economy by affecting inflation rate . If there is more than enough supplies , it results into deflation which means reduction in overall price level . On the contrary if there are less than required amounts , it results into inflation which means increase in overall price level . Ideally both should be equal but this doesn’t happen practically . In developed countries like US , UK etc., general level of supplies result into +2% inflation while on the other hand less developed economies have double digit inflation rates due to low level of supplies . Increase in supplies that matches with demands generally contributes to economic growth as well as employment generation . T""

What market does supply represent?

Supply represents the goods market.

How is supply represented in economics?

Supply is represented as a curve on a graph with quantity provided plotted horizontally and price (the independent variable) plotted vertically.

What determines whether there will be an excess or shortage of goods in the marketplace?

The demand for a product will affect whether there will be an excess or shortage of goods in the marketplace. If demand exceeds supply then there may be an excess of goods available for purchase; if it falls short then there may be a shortage of those same goods available for purchase.