What is ‘Quantity Supplied’
In economics, quantity supplied describes the amount of goods or services that are supplied at a given market price. How supply changes in response to changes in prices is called the price elasticity of supply. The quantity supplied depends on the price level, and the price can be set by either a governing body by using price ceilings or floors, or by regular market forces.
Explaining ‘Quantity Supplied’
If a price ceiling is set, suppliers are forced to provide a good or service, no matter the cost of production. Generally, suppliers are willing to supply more of a good when its price increases and less of a good when its price decreases.
Suppliers’ Control Over Quantity Supplied
Ideally, suppliers want to charge high prices and sell large amounts of goods to maximize profits. While suppliers can usually control the amount of goods available on the market, they do not control the demand for goods at different prices. As long as market forces are allowed to run freely without regulation, consumers also have control over how goods sell at given prices. Consumers ideally want to be able to satisfy their demand for products at the lowest price possible.
Determining Quantity Supplied Under Regular Market Conditions
The optimal quantity supplied is the quantity that consumers are willing to buy all of the quantity supplied. To determine this quantity, known supply and demand curves are plotted on the same graph. On the supply and demand graphs, quantity is in on the x-axis and demand on the y-axis.
Market Forces
Theoretically, markets should strive for equilibrium, but there are many forces that pull them away from this point. Many markets do not operate freely; instead, they face external forces, such as government rules and regulations that influence how much of a product suppliers have to provide.
Further Reading
- An empirical comparison of published replication research in accounting, economics, finance, management, and marketing – www.sciencedirect.com [PDF]
- Proprietary public finance and economic welfare – www.sciencedirect.com [PDF]
- Water pricing and full cost recovery of water services: economic incentive or instrument of public finance? – iwaponline.com [PDF]
- Deposit rate-setting, risk aversion, and the theory of depository financial intermediaries – www.jstor.org [PDF]
- Finance and economic growth-a review of theory and the available evidence – ideas.repec.org [PDF]
