What is quantity of a good or service that producer sell at a market price?

The law of supply and demand is perhaps one of the most fundamental concepts and it is the backbone of a market economy.

Índice Show

The law of demand
The law of supply
Time and supply
Did you like the article? …. Before you go:
Quantity Supplied Explained
Quantity Supplied Schedule And Graph
Quantity Supplied Formula
Example
Supply vs Quantity Supplied
Frequently Asked Questions (FAQs)
Recommended Articles

Demand refers to the quantity of a product or service that buyers want.

The quantity demanded of a product is the quantity that people are willing to buy at a given price; the relationship between the price and the quantity demanded is known as the demand ratio.

Supply represents how much the market can supply.

The quantity supplied of a given good is the quantity that producers are willing to supply when they receive a given price.

The correlation between the price and the quantity of a good or service supplied to the market is known as the supply ratio.

Price, therefore, is a reflection of supply and demand.

The relationship between demand and supply underlies the forces behind the allocation of resources.

In theories of market economics, the theory of demand and supply will allocate resources in the most efficient way possible.

How? Let us take a closer look at the law of demand and the law of supply.

The law of demand

The law of demand states that, all other things being equal, the higher the price of a good, the less people will demand that good.

In other words, the higher the price, the smaller the quantity demanded.

The quantity of a good that buyers purchase at a higher price is less because as the price of a good rises, so does the opportunity cost of buying that good.

As a result, people will naturally avoid buying a good that forces them to forego consumption of something else they value more.

The graph below shows that the curve is downward sloping:

A, B and C are points on the demand curve. Each point on the curve reflects a direct correlation between quantity demanded (Q) and price (P).

Thus, at point A, the quantity demanded will be Q1 and the price will be P1, and so on.

The demand ratio curve illustrates the negative relationship between price and quantity demanded.

The higher the price of a good, the lower the quantity demanded (A), and the lower the price, the more the good will be demanded (C).

The law of supply

Like the law of demand, the law of supply shows the quantities that will be sold at a given price.

But unlike the law of demand, the supply ratio shows an upward slope.

This means that the higher the price, the higher the quantity supplied.

Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue.

A, B and C are points on the supply curve.

Each point on the curve reflects a direct correlation between quantity supplied (Q) and price (P).

At point B, the quantity supplied will be Q2 and the price will be P2, and so on.

Time and supply

However, unlike the demand relationship, the supply relationship is a factor of time.

It is important for supply because suppliers must, but cannot always, react quickly to a change in demand or price.

Therefore, it is important to try to determine whether a price change caused by demand will be temporary or permanent.

Say there is a sudden increase in demand and price for umbrellas in an unexpected rainy season; suppliers can simply accommodate the demand by using their production equipment more intensively.

However, if there is a climate change and the population needs umbrellas all year round, the change in demand and price is expected to be long-term; suppliers will have to change their equipment and production facilities to meet long-term demand levels.

Did you like the article? …. Before you go:

Try Efficy CRM
The most complete CRM

TRY NOW FOR FREE

Learn more about:

How to fix the selling price to the public?

Home Politics, Law & Government Economics & Economic Systems

supply and demand, in economics, relationship between the quantity of a commodity that producers wish to sell at various prices and the quantity that consumers wish to buy. It is the main model of price determination used in economic theory. The price of a commodity is determined by the interaction of supply and demand in a market. The resulting price is referred to as the equilibrium price and represents an agreement between producers and consumers of the good. In equilibrium the quantity of a good supplied by producers equals the quantity demanded by consumers.

increase in demand

The quantity of a commodity demanded depends on the price of that commodity and potentially on many other factors, such as the prices of other commodities, the incomes and preferences of consumers, and seasonal effects. In basic economic analysis, all factors except the price of the commodity are often held constant; the analysis then involves examining the relationship between various price levels and the maximum quantity that would potentially be purchased by consumers at each of those prices. The price-quantity combinations may be plotted on a curve, known as a demand curve, with price represented on the vertical axis and quantity represented on the horizontal axis. A demand curve is almost always downward-sloping, reflecting the willingness of consumers to purchase more of the commodity at lower price levels. Any change in non-price factors would cause a shift in the demand curve, whereas changes in the price of the commodity can be traced along a fixed demand curve.

decrease in supply

The quantity of a commodity that is supplied in the market depends not only on the price obtainable for the commodity but also on potentially many other factors, such as the prices of substitute products, the production technology, and the availability and cost of labour and other factors of production. In basic economic analysis, analyzing supply involves looking at the relationship between various prices and the quantity potentially offered by producers at each price, again holding constant all other factors that could influence the price. Those price-quantity combinations may be plotted on a curve, known as a supply curve, with price represented on the vertical axis and quantity represented on the horizontal axis. A supply curve is usually upward-sloping, reflecting the willingness of producers to sell more of the commodity they produce in a market with higher prices. Any change in non-price factors would cause a shift in the supply curve, whereas changes in the price of the commodity can be traced along a fixed supply curve.

If you're seeing this message, it means we're having trouble loading external resources on our website.

If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked.

Quantity supplied refers to the willingness of manufacturers to produce a certain number of goods or services for sale as per the prevalent market demand. It serves the significant purpose of controlling the wastage of capital, resources, and goods by producing the desired supply level for the goods.

You are free to use this image on your website, templates, etc, Please provide us with an attribution link

Source: Quantity Supplied (wallstreetmojo.com)

Firms and businesses use it to determine the quantity they need to provide to meet the demand. It directly depends on the pricing of the goods in the market. It means the change in pricing of the goods affects their quantity. When a product is in high demand, then the producer increases supply to meet the demand.

The quantity supplied for a good or service is the quantity the sellers or producers are willing to increase or decrease the supply for a particular price at a particular time. All other factors other than price remain constant.
The law of supply is an integral part of this concept as, in a free market, whenever there is a price change, the supply curve observes a shift/movement.
Its formula is Qs = x + yP, which is also written as Qs = Qv+iP
It is different from the supply because, in economics, supply is a generic term. In contrast, the term quantity supplied is used only when a certain price change encourages the producer to increase or decrease supply to make a profit.

Quantity Supplied Explained

The quantity supplied is an economic concept. It means the inclination of producers to produce the goods demanded in the market at a certain period. It depends on the price fluctuation i.e., increases or decreases in the price only if other non-price factors remain constant. Any increase in the product price will also enhance the producer’s profit, so they find a compulsion to produce more to take the market advantage. However, the producer or supplier may face a situation where they must forcefully give up profits or incur losses. Examples include various traded commodities and perishable products, especially if there is an absence of storage.

When products and service prices decrease, the amount of supply also decreases. However, a few factors, such as operational cash, constrain the ability to reduce the supply of goods and services during such a situation.

Quantity Supplied Schedule And Graph

The law of supply comes into play for quantity supplied. For example, the product’s price increase may lead to more quantity supplied in a market with numerous product or service sellers. Here, the supply schedule table represents the association between the price and the number of products supplied. The supply schedule presents the data of the number of goods or services supplied concerning changes in the prices throughout a specific period when other factors remain constant.

You are free to use this image on your website, templates, etc, Please provide us with an attribution link

Source: Quantity Supplied (wallstreetmojo.com)

When the goods at prevailing prices completely satisfy the demand, the condition of quality supplied is optimum. Here, Demand = Supply. Economists use graphs to find out this quantity. The X-axis shows the quantity supplied, and the Y-axis plot the prices. The supply curve slopes upwards as producers supply more when prices increase. The point where the supply curve and the demand curve meet are the equilibrium point. At this point, the demand equals supply. If the producers fail to meet the demand while supplying, they incur a loss.

Whenever the supply increases, it leads to the shift of the supply curve towards the right. While the supply decreases, the shift in the supply curve is towards the left. If one studies the supply curve and the quantity supplied, one observes that price change affects a movement of change in the latter in the direction of the former.

Quantity Supplied Formula

The quantity supplied formula, which depends on the number of goods and services supplied and the unit prices is:

Qs = x + yP

Where

For instance, if there is a demand for 500 sunglasses at $5 per piece, then one can write the formula as:

Qs = 500 + 5P

Example

Here is the quantity supplied example to explain the concept further:

Let us assume Apple manufactures 500 iPhones at $30,000 per piece per week to cater to the customer’s demand. Its competitor decides to increase the price to $35,000 to increase profits. If Apple wants to earn more profits, it can do two things – either increase the selling price or increase the supply of iPhones.

In both cases, until the customers do not increase their demand, the shelves of iPhones at the retailers’ shops will be empty. So, if the demand for iPhones increases to 700 pieces per week, the number supplied will also equal 700 pieces. However, if the demand for iPhones decreases to 400 pieces per week, the number of supply will also reduce to 400 pieces as Apple will not want to waste its capital and resources.

Supply vs Quantity Supplied

Although quantity supplied and supply have similarities, they have significant differences too.

Supply	Quantity Supplied
It is a general term used in economics that denotes various quantities of goods and services sold at different prices by the producers.	It is related to the demand for the products and their related market price, which producers are willing to produce. It differs from the actual amount of goods supplied (total supply).
It is represented completely on a supply curve.	It is the exact number of goods and services supplied at a particular price.
It is the level of supply of goods at various prices.	It is the number of goods the producers are willing to supply to meet the product demand.
Any variation in factors other than the price of goods affects the supply curve. As a result, the producer’s willingness to supply gets affected.	Any variation in it results from a variation in the product’s price.
The supply curve indicates the supply of a product.	One can make any point on the supply curve to represent the quantity of product supplied.
A modification in the supply of a good is represented by the movement of the complete curve of the supply.	There is only a parallel shift of the supply curve when the quantity that is supplied changes.

Frequently Asked Questions (FAQs)

What is the relationship between price and quantity supplied?

According to economists, there is a positive relationship between price and the quantity supplied in accordance with the law of supply. It is possible because a higher price leads to higher quantity supply, and a lower price leads to lower quantity supply. It happens only when other factors affecting supplies do not change.

What changes quantity supplied?

Demand changes quantity supplied. A movement along the supply curve due to the price variation changes it. Any factor besides price change leads to a change of movement of the complete supply curve, making the change in supply.
Factors such as elasticity of supply and demand, regulations by the government, and fluctuation in raw material and input cost also influence the supplied quantity.

How to find quantity supplied?

To find the quantity supplied – Qs, one needs the values of quantity demanded Qv and the price (P) of the individual unit ‘i’. All these values will be used in the formula of supply, Qs= Qv+iP, to calculate the quantity supply.
The supply will be optimum when the market is at equilibrium. The equilibrium point is also plotted on a graph. It is a point where the demand and supply curves intersect.