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What is the difference between supply and production in an economy? Supply quantity

Buyers are only one side of the market. On the other side, those who are called upon to satisfy demand are numerous manufacturers and sellers of products. Their actions form the proposal.

OFFER- this is the relationship between the quantity of a product that sellers are willing and able to sell and the prices for this product.

When planning to start a business, an entrepreneur must apply his knowledge and abilities in a specific matter. For example, an entrepreneur has a penchant for confectionery. But before his desire leads to the appearance of real cakes on store shelves, he needs to make sure that he has the necessary conditions for this. The possibility of producing any product is associated primarily with making a profit. This means that before starting a business, an entrepreneur must establish that his costs will be lower than the current market prices for the product. Only in this case can you count on making a profit.

Now let’s look at what determines the size of the supply.

Just like the quantity of demand, it will be determined by the price. An increase in price is accompanied by an increase in the quantity supplied. For example, if the price is 10 rubles. per piece of goods, then the value of its supply will be 2 pieces. Price increase to 30 rubles. will lead to the fact that the supply quantity will increase to 31 units.

When determining the amount of supply, it is necessary, just as when identifying the amount of demand, to record the place and time of purchases and sales of goods, since at another time or in some other place the same price values may correspond to a different volume of supply. The relationship between price and quantity supplied can be depicted graphically.

Fig. No. 8.

AMOUNT OF SUPPLY- the quantity of goods (services) that sellers are able and willing to sell at a certain price in a given place and at a given time.

The supply curve shows that an increase in price is accompanied by an increase in the quantity supplied. For example, point A shows that the price is 15 rubles. corresponds to the supply volume of 10 pcs. goods, price 30 rub. - 30 pcs. etc. An increase in price will be accompanied by an upward movement of the corresponding point, for example from point A to point B.

The SS curve obtained on the graph (from English, supply - supply) is called the supply curve. Each point on this curve shows the relationship between the price of a product and the quantity supplied. In this case, the supply curve, unlike the demand curve, has a positive slope. A positive slope indicates that there is a direct relationship between the quantity supplied and the price of a product, which characterizes the operation of the law of supply.

LAW OF SUPPLY. All other things being equal, a change in the supply of a good or service is directly dependent on the change in the price of this good (service).

Thus, according to the law of supply, as the price of a good rises, the quantity supplied increases, and a decrease in its price will cause the quantity supplied to fall.

What explains the law of supply? To answer this question, that is, to justify the reliability of the law of supply, we can put forward the following arguments.

1. When the price of a product rises, manufacturers interested in increasing profits will begin to expand their production. In addition, entrepreneurs from other industries will flock to the industry where prices are rising, withdrawing their capital from less profitable businesses. The opening of new enterprises will further increase the volume of supply.

2. An increase in the volume of supply is associated with an increase in the price of a product also because the production of each additional unit of a product requires additional costs. Therefore, additional output will be produced if the price of the product increases. The expansion of production can continue until the additional costs exceed the additional income received from producing one more additional unit of output.

Factors influencing supply.

Until now, we have been talking about changing the quantity of supply, i.e., the quantity of a product that producers intend and can produce at a certain price for this product. This can be illustrated by moving along the supply curve SS from point A to point B (see Fig. 8). This suggests that the quantity supplied is primarily a function of the price of the good:

Q S =f(P)

But in real life, supply changes not only under the influence of changes in the price of the produced goods. There are also a number of factors that cause an increase or decrease in supply that are not related to changes in the price of a given product. Consider the case of a change in supply.

1. Prices for resources. Suppose that manufacturers now buy cheaper raw materials to produce their products. Since purchasing it requires less costs, at the same prices for manufactured products, manufacturers with different initial levels of costs have the opportunity to produce more products.

How will the supply curve graph react to this? Let's construct a new supply curve next to the old one (see Fig. 9).

Fig. No. 9.

The new supply curve S"S" is located to the right of the previous one, which indicates an increase in supply. At a price level of 10 rubles. The supply quantity is 10 pcs. then vara, and not 2, as before; at a price of 40 rubles. The supply quantity is 50 pcs. goods, whereas previously it was 40 pcs. Consequently, factors unrelated to the price of a given good cause a change in supply, which causes the supply curve to shift to the right if supply rises or to the left if supply falls.

2.Change in production technology. If manual labor is replaced by machines, there will be an increase in labor productivity and, therefore, the supply of goods will increase, the supply curve will shift to the right.

3.Taxes and subsidies. Producers view tax increases as an increase in production costs. An excessive increase in income taxes will lead to a reduction in production, as it will make it less profitable. The supply curve will shift to the left.

Subsidies- this is “costs in reverse”. Subsidies are often given to stimulate production of either a particular product or production in certain areas of the country. Subsidies lead to an increase in supply and a shift of the supply curve to the right.

4. Prices for other goods. Often, an increase in the prices of some goods leads to a change in the supply of other goods. Thus, an increase in the price of yogurt will switch producers from making kefir to producing yogurt, and the supply of kefir will decrease, its supply curve will shift to the left.

5. Expectations of price changes. In conditions of inflation, the expectation of price increases will have a different impact on the behavior of the company in the short and long term.

In the short-term period, when costs have already been incurred, the company, knowing that prices are rising daily, say, by 0.5%, will try to hold the goods in the warehouse for at least 3 days, knowing that after 3 days it will sell it by 1.5% expensive. Therefore, in the short run, supply will decrease and the supply curve will shift to the left.

In the long term, slight inflation will stimulate production growth, since rising prices will bring more profits to firms. The supply curve will shift to the right.

6. Increase in the number of manufacturers.

If the price elasticity of demand is the reaction of buyers to a change in price, then the price elasticity of supply is the reaction to a change in price on the part of producers. We found that there is a direct relationship between price and supply volume. Elasticity of supply allows us to determine the degree of response of producers of various products to price changes.

PRICE ELASTICITY OF SUPPLY shows how much the quantity of supply will change in percentage terms when the price of a good (service) changes by 1%. Supply is elastic if

if the price changes by 1%, its volume will change by more than 1%.

The coefficient of price elasticity of supply is calculated in the same way as the coefficient of price elasticity of demand is calculated:

where Eps ~~ coefficient of price elasticity of supply; Q - change in supply volume; P - price change.

For example, when the price of tulips changed from 0.7 to 1.2 guilders per piece, their supply increased from 200 thousand pieces. up to 280 thousand pcs. Is the supply of tulips price elastic or inelastic?

Let's calculate the elasticity coefficient:

The supply of tulips is price inelastic.

When calculating the coefficient of price elasticity of supply, note that it always has a positive sign, since there is always a direct relationship between price and quantity of supply. For the same reason, price and revenue change in the same direction.

What determines the degree of response of supply to price?

Time factor

First of all, the time factor plays a major role here. If, when the price changes, demand can react instantly, then in the case of supply, an instant reaction is usually excluded. The fact is that to change supply it is necessary to carry out a number of transformations in production. Some of them can be carried out quickly, while others take months or even years.

In this regard, when analyzing the elasticity of supply, three time periods are distinguished: short-term, medium-term and long-term.

Elasticity of supply in the short run

Imagine that 6 tons of ripe tomatoes were brought to the market from the nearest agricultural association. Since tomatoes are a perishable product, the seller is interested in selling them as quickly as possible. Let us assume that market conditions are in favor of the supplier: the volume of demand for tomatoes is high, which, with a constant volume of supply, caused an increase in prices. But in the short term, sellers are not able to respond to increased prices by increasing supply, and, currently possessing six tons of tomatoes, they will not be able to sell one kilogram more. Supply in the short run will be completely price inelastic. This situation can be illustrated using a graph.

The supply graph is a line parallel to the y-axis. Despite the increase in price from P 1 to P 2 and higher, supply, being absolutely inelastic in the short term, remains equal to the value of Qs.

In the medium term, the supply curve has a slight slope, which reflects the known reaction of the volume of supply to changes in price.

The figure shows an elastic supply curve, i.e. the degree of change in supply volume in the long run is higher than the price value.

The above examples showed that the elasticity of supply increases as the time period under consideration increases.

Taking into account the importance of the time factor when analyzing the degree of price elasticity of supply, a number of other factors can be identified that explain the varying degrees of elasticity of supply in a given case.

1. The presence or absence of production reserves. If production capacity is not fully loaded, and some workers work part-time, the enterprise has the opportunity to quickly respond to an increase in prices for the products it produces. In the short run, supply in this case will be elastic. If there is no unused capacity and labor resources, it will take a long time to build

new or expand existing production sites, equip them with additional equipment, and train additional labor. In this case, supply in the short run will be inelastic.

2. The degree of elasticity of supply is greatly influenced by the nature and type of goods or services produced.

3. The supply of goods is elastic when the firm has the ability to store a significant amount of finished goods inventory. In this case, the company will be able to quickly respond to growing demand and rising prices not only through the production of new products, but also through existing inventories. If prices fall, then the quantity supplied can be quickly and significantly reduced by increasing inventories of finished goods. But in this case it is necessary that the nature of the product allows it.

PRACTICAL APPLICATION OF ELASTICITY THEORY

Elasticity of demand and behavior of firms

It was previously noted that knowledge of the theory of elasticity is necessary primarily for representatives of the marketing services of companies. It makes it possible to build a pricing strategy and make the right decision regarding whether to reduce or increase prices if the company’s goal is to increase income.

Now we can clarify that the manager of the company must be able to take into account that the elasticity of demand for the company's products and the elasticity of market demand do not coincide. The elasticity of demand for a firm's products is usually higher than the elasticity of market demand for a given type of product as a whole. This is explained by the buyer having a choice in the market between different types of similar goods.

The purpose of studying the topic is to find out: - what is supply and demand, market equilibrium, determinants of supply and demand.

When studying the topics of the work, the concepts of “demand”, “supply”, “magnitude of demand”, “magnitude of supply”, “market equilibrium”, determinants of supply and demand, etc. are revealed.

When studying the topics “Demand” and “Supply”, you need to remember from the Algebra course the topics “Increasing and decreasing functions”, “Direct and inverse dependence of functions”, “Linear functions”.

Before answering the test questions, you should remember the definitions of the concepts discussed in the task, the factors influencing changes in supply and demand, and it is also advisable to construct dependence graphs in order to visually analyze them.

Please note that in questions about assignments on topics 2 of work, a short-term period is considered! In this case, the factors of production cannot be changed according to the terms of the assignment, since they cannot change over the period of time under consideration; in the long run, all factors are variable.

Keep this in mind when determining the correct answer!

Quantity of Supply is the amount of goods or services that a manufacturer or seller can offer for sale on the market for a given period of time. V.p. depends on prices for goods and services, production costs, level of technology, and the amount of taxes. V.p. together with the magnitude of demand is the main factor determining .

Dictionary of business terms. Akademik.ru. 2001.

See what “Value of Proposal” is in other dictionaries:

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The quantity of a good or service that a seller offers for sale at a specific price during a specified period. In English: Quantify supplied See also: Offer Financial Dictionary Finam... Financial Dictionary

Supply quantity- QUANTITY SUPPLIED The quantity of a product (or resource) that the seller is willing to sell at a given price during a certain period of time. The amount of supply depends on the price of the product or resource, the level of technological progress, etc. Cm.… … Dictionary-reference book on economics

supply quantity- a quantity of goods or services of a certain type offered for sale on the market at a specific price during a certain period of time. The amount of supply depends on the prices of goods and services, production costs, prices of substitute goods... Dictionary of economic terms

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AMOUNT OF SUPPLY- the quantity of a given good or service that a seller offers for sale at a specific price during a specified period... Large economic dictionary

AMOUNT OF SUPPLY- – the quantity of a given product (service) that the seller offers for sale at a certain price... Economics from A to Z: Thematic Guide

Supply quantity- the quantity of a good or service that producers want and can buy (sell) at a given price at a given time in a certain market... Dictionary of Economic Theory

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Books

The theory of social wealth. Lecture course. In 2 parts. Part 1, Sorokin Alexander Vladimirovich. The course “Theory of Social Wealth” has been taught in the third semester of the undergraduate degree at the Faculty of Economics of Moscow State University named after M.V. Lomonosov since 2007. The book presents a synthetic model…

Supply is the dependence, established in a certain period of time, of the amount of supply on the market for a certain product during a certain period of time on the price levels at which this product can be sold.

Supply acts as a set of supply quantities at different price levels.

Graphically, supply is depicted as a line with a slope opposite to the demand line (Fig. 4.2).

Rice. 4.2. supply curve graph

Supply quantity - the volume of a product of a certain type that sellers are willing to offer over a certain period of time to the market at a certain level of the market price for this product (on the chart these are specific figures for the price and product at any point A-B-C-D on the supply line).

The proposal reflects the logic of behavior of the manufacturer and seller.

Supply characterizes the level and dependence of volumes of goods on purchase prices.

The quantity of supply characterizes a specific volume of goods at a specific price level.

As for demand, the characteristic of the degree of change in the price-supply value is elasticity.

But the relationship between supply and price in dynamics is of a completely different nature than that of demand - the opposite.

In Fig. 4.2 it is clear that the supply line is an ascending straight line; it reflects the directly proportional relationship “price - supply”. This direct connection is defined in economics as the law of supply.

The law of supply explains the unidirectionality of changes in the price-supply relationship: an increase in price stimulates supply growth, a decrease slows down supply.

From the consumer's point of view, price acts as a deterrent. The high price barrier means that the paying consumer will buy a relatively small quantity of the product at that price; The lower the price barrier, the more the consumer will buy. On the other hand, the supplier acts as the recipient of money for the product. For him, the price represents the revenue for each unit of the product, so it serves as an incentive to produce and offer his product for sale on the market. Given production costs, the higher the price, the more profit the producer receives and, therefore, the stronger his incentive to increase supply.

As an example, consider an enterprise in the manufacturing industry. At some stage, industrialists usually face an increase in unit production costs, so to cover the increased costs, it is necessary to increase the price of the product produced. But why are costs rising? They increase because certain production resources, especially production space and machinery, cannot be increased in a short time. Therefore, as a firm increases the number of more mobile resources, such as labor, raw materials and components, the stationary facilities and equipment at some point become overloaded, causing production efficiency to decrease and the cost of producing each subsequent unit of output to increase. To produce these higher-value units of product, manufacturers must receive a higher price. There is a direct relationship between price and quantity supplied.

In addition to price, a number of other factors can influence supply. These are the following:

resource prices;

production technology;

taxes and subsidies;

prices for other goods;

expectations of price changes;

number of sellers in the market.

Changing factors will shift the supply curve of a product either to the right or to the left. A shift to the right means an increase in supply: producers supply more of the product at each possible price. A shift to the left indicates a reduction in supply: suppliers offer less of the product at each possible price.

Let us now consider the impact on supply of each of the listed factors:

1. Prices for resources. There is a very close connection between production costs and supply. A firm's supply curve is based on production costs; For additional units of the product, the firm must receive higher prices because it costs more to produce these additional units. It follows that a decrease in resource prices will reduce production costs and increase supply, that is, it will shift the supply curve to the right. Example: If seed and fertilizer prices decrease, you can expect the supply of corn to increase. Conversely, an increase in resource prices will increase production costs and reduce supply, that is, shift the supply curve to the left. Example: an increase in the price of iron ore and coke increases the cost of steel production, and leads to a reduction in its supply.

2. Technology. Improvements in technology mean that new knowledge allows each unit of output to be produced with fewer resources. At given resource prices, this will lead to lower production costs and increased supply. Example: Recent powerful breakthroughs in the field of superconductivity open up the prospect of transmitting electrical energy with little or no loss. Currently, when transmitting electricity through copper wires, losses are about 30%. What is the possible consequence of this discovery? A significant reduction in production costs and an increase in the supply of a number of products, the production of which requires a large amount of electricity.

3. Taxes and subsidies. Firms view most taxes as costs of production. Therefore, raising taxes, say sales tax or property tax, increases production costs and reduces supply. Subsidies are considered a “reverse tax.” When the government subsidizes the production of a good, it actually reduces costs and increases supply.

4. Prices for other goods. Changes in the prices of other goods can also shift the supply curve of a product. A decrease in the price of wheat may encourage a farmer to grow and offer more corn for sale at each possible price. Conversely, an increase in the price of wheat may force farmers to reduce production and supply of corn. A sporting goods firm may reduce its supply of basketballs when the price of soccer balls increases.

5. Expectations. Expectations of changes in the price of a product in the future may also influence a manufacturer's desire to market the product currently. However, it is difficult to draw a conclusion about how expectations of, say, higher prices will affect the current supply of a product. Farmers may delay bringing their current crop of corn to market in anticipation of higher prices in the future. This will cause a reduction in the current supply. On the other hand, in many manufacturing industries, the expectation of higher prices can induce firms to increase production capacity and thereby cause an increase in supply.

6. Number of sellers. For a given output of each firm, the greater the number of suppliers, the greater the market supply. As new firms enter the industry, the supply curve will shift to the right. The smaller the number of firms in an industry, the smaller the market supply. This means that as industry exits, the supply curve will shift to the left.

The difference between a change in supply and a change in quantity supplied is the same as the difference between a change in demand and a change in quantity demanded. A change in supply is reflected in a shift in the entire supply curve. An increase in supply shifts the curve to the right, a decrease in supply shifts it to the left. The reason for a change in supply is a change in one or more determinants of supply. Economists use the term "supply" to refer to a scale or curve. Therefore, a change in supply must mean that the whole scale has changed and that the curve has shifted in some direction.

On the contrary, a change in the quantity supplied means a movement from one point to another on a constant supply curve. The reason for this movement is a change in the price of the product in question.

Within the micromarket, supply has the following definitions:

a) individual offer - for one manufacturer;

b) market supply - for all producers of a given product;

In general, the analysis of supply by market levels provides a picture or rationale for detecting the process of monopolization and can therefore be used as a tool in the competitive relations of firms and in the economic policy of the state.

AMOUNT OF SUPPLY

quantity of a particular type of good or service offered for sale on the market at a specific price during a specified period of time. The amount of supply depends on the prices of goods and services, production costs, prices of substitute goods and complementary goods, and taxes.

Raizberg B.A., Lozovsky L.Sh., Starodubtseva E.B.. Modern economic dictionary. - 2nd ed., rev. M.: INFRA-M. 479 pp.. 1999 .

Economic dictionary. 2000 .

See what "SENTENCE SIZE" is in other dictionaries:

The quantity of a good or service that a manufacturer or seller can offer for sale on the market in a given period of time. V.p. depends on prices for goods and services, production costs, level of technology, and the amount of taxes. V.p. together with… … Dictionary of business terms

AMOUNT OF SUPPLY- the quantity of a given good or service that a seller offers for sale at a specific price during a specified period... Large economic dictionary

AMOUNT OF SUPPLY- – the quantity of a given product (service) that the seller offers for sale at a certain price... Economics from A to Z: Thematic Guide

Supply quantity- the quantity of a good or service that producers want and can buy (sell) at a given price at a given time in a certain market... Dictionary of Economic Theory

Books

The theory of social wealth. Lecture course. In 2 parts. Part 1, Sorokin Alexander Vladimirovich. The course “Theory of Social Wealth” has been taught in the third semester of the undergraduate degree at the Faculty of Economics of Moscow State University named after M.V. Lomonosov since 2007. The book presents a synthetic model…

Offer - the quantity of a product that a producer is willing and able to produce and deliver to the market at any given price out of a range of possible prices over a specified period of time. The direct relationship between price and quantity supplied is called law of supply . The dependence of the quantity of goods produced on the price level can be depicted graphically.

Offer - the quantity of a product that the manufacturer is willing and able to offer on the market at a given time at one of the possible prices. It is necessary to distinguish natural material(by assortment) Andcost(the amount of goods expressed in money, prices) forms of product supply. Product supply includes all goods on the market, including goods in transit. It is formed due to the volume of production, inventories and imports. On micro level talking about an individual offer, on macro level - about aggregate supply - the real volume of national production that can be produced by all commodity producers at different price levels.

Supply quantity - the quantity of goods that a seller or group of sellers wishes to sell per unit of time under certain conditions. Offer price - the minimum price at which the seller agrees to sell a certain quantity of a given product. Typically, the purpose of the sale is to make a profit. Therefore, all sellers strive to sell their goods at the highest price, and the higher the price, the greater the quantity of goods will be offered for sale.

Just like demand, supply can be characterized by tables and graphics.

Unit price, rub.	Supply volume, pcs.

AND

The depicted curve S characterizes the price level and sales volume of goods. It has a positive slope, which indicates the manufacturer’s desire to sell more goods at a higher price.

In addition to price, other factors also influence supply:

1) Prices of production factors Prices for resources determine production costs. A change in the cost of any of the production resources, including the cost of raw materials, materials, fuel or wages, costs of machines, machinery, equipment, buildings, structures will shift the supply curve. If the price of such inputs falls, firms will tend to offer more output. The supply curve shifts to the right as the supply of goods increases. High resource prices shift the supply curve to the left.

Production technology. Improvements in technology will lead to a reduction in costs per unit of production, therefore the volume of production will increase, which will lead to an increase in supply.

3) Taxes and subsidies. Enterprises view most taxes as production costs, so increasing them will lead to a reduction in supply. On the contrary, government subsidies help reduce production costs and increase supply. Raising taxes increases costs and reduces production, shifting the supply curve to the left. Subsidies will shift the supply curve to the right.

4) Expectations of price changes. Expectations of future price changes for a product may influence a manufacturer's desire to hold back a product or bring a larger quantity of product to market.

5) Number of sellers in the market. The more manufacturers put their goods on the market, the greater the supply.

A shift of the supply curve to the right from S to S 1 in the figure means an increase in supply. A shift to the left, from S to S 2, indicates a reduction in supply.

All of these factors are external determinants of supply and have an objective, i.e. character independent of the product manufacturer.

Law of supply : The higher the price, the greater the supply, and vice versa.