Quantity Supplied

Definition

Quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. It can change in response to alterations in the price levels of that particular good in an economy. This relationship between quantity supplied and the product’s price is called the supply relationship.

Phonetic

The phonetic pronunciation for “Quantity Supplied” is: Quantity: /ˈkwɑːntɪti/Supplied: /səˈplaɪd/

Key Takeaways

1. The Quantity Supplied represents the amount of goods or services that producers are willing and able to sell at a certain price. It’s a basic economic principle that is guided by the law of supply.
2. The Quantity Supplied generally increases as the price of a good or service increases. This is due to the fact that producers have a higher incentive to produce more as they can earn more profit due to the higher price.
3. Various factors apart from price can influence Quantity Supplied. These include the cost of production, technological advancements, prices of related goods, seller expectations and government policies. Any changes in these factors can lead to a shift in the supply curve reflecting a change in Quantity Supplied.

Importance

Quantity Supplied is a critical concept in business and finance as it determines the specific amount of a particular good or service that producers are willing to supply at a given price. This concept plays a pivotal role in understanding market dynamics and economic principles. It is directly tied to the law of supply, which states that there’s a direct relationship between price and quantity: as the price of an item increases, suppliers are willing to produce more of that item, given that they will receive more revenue from their sales. Hence, understanding the quantity supplied can enable financial analysts, business leaders, and policy makers to anticipate market responses, set appropriate price levels, and make informed decisions for operational and strategic planning.

Explanation

Quantity supplied is an essential concept in the landscape of economics and business, remarkably pertinent to the information of supply and demand dynamics within a market. The core idea is to evaluate how many units of a good or service a producer is willing to supply at a given price. This tool is not only about numbers, but is instrumental in comprehending producer behavior and market movements. It aids in determining the supply curve, a fundamental component of market analysis that depicts the relationship between product price and quantity supplied. The higher the price, the more quantity a producer is likely to supply as it becomes more profitable. Conversely, a lower price will lessen the incentive for production and thus decrease the quantity supplied. Therefore, understanding quantity supplied allows businesses and economists to forecast production decisions and market trends for prudent strategizing and policy-making.

Examples

1. Agricultural Produce: A farmer produces 1000 bushels of wheat per year because he knows that this is the amount he can normally sell at the current market price. This is the quantity supplied by the farmer. If the market price of wheat increases, he may choose to supply more wheat to the market to take advantage of the higher price, thus increasing the quantity supplied. 2. Manufacturing Goods: A car manufacturer may be able to produce 100,000 vehicles each year, given its available resources. If the demand for cars increases or if there is an favorable shift in market prices, the manufacturer may choose to increase production to 120,000 vehicles. This increase is an example of a change in quantity supplied. 3. Retail Industry: A bookstore normally orders 500 copies of a popular novel to sell in a month. If the book suddenly becomes more popular, the bookstore may choose to order an additional 200 copies to meet the increased demand, resulting in an increase in quantity supplied.

Frequently Asked Questions(FAQ)

Related Finance Terms

• Law of Supply
• Supply Schedule
• Market Supply
• Equilibrium Price
• Supply Curve

Sources for More Information

• • Investopedia
  • Corporate Finance Institute
  • WallStreetMojo
  • The Economic Times