What is Quantity Supplied?
Definition: Quantity supplied is one of the many concepts in economics, and this particular concept represents the amount or quantity of goods or services that producers or distributors are willing to provide to the market or consumers at a specific market price.
When dealing with quantity supplied, the amount of goods and the market price or price at which the buyers are willing to buy are important variables. The quantity of products supplied may change at any given point depending on the price at which the buyers are willing to accept the product.
In this case, the price is the only fact that can affect the quantity supplied in the market. The price of a commodity tends to go up when there is a shortage of the product in the market. This means that quantity supplied ties in closely with supply and demand.
How does quantity supplied work?
Sometimes the price of a particular product or service is controlled or regulated by a governing body and sometimes it is controlled by the forces of supply and demand. Governing authorities usually set prices at specific levels so that they can protect consumers from being exploited.
In such cases, the suppliers or producers are forced to sell at lower prices then they would have sold a product if the governing authorities set a price limit. In other words, the limit does not consider the cost of production.
Suppliers may, therefore, react to the price ceiling by adjusting their quantity supplied. Usually, the supplier’s goal is to sell at the highest possible price that buyers are willing to purchase the product so that they can maximize their profits. A price ceiling may undercut their price targets, and in turn, reduce their profits. In such cases, the supplier may react by supplying less of the product, especially if it is not a perishable item.
In a situation where the markets operate freely, then the market forces help shape the prices. For example, suppliers want to sell at high prices to maximize profits while consumers want to spend the least amount possible for the same product. This kind of push and pull helps the market to arrive at reasonable prices for commodities. This push and pull is usually referred to as market forces.
Quantity Supplied Example
Quantity Supplied is determined by the producer or supplier
Suppliers usually adjust the quantity supplied if there is a lot of demand for the product in the market and also if consumers are willing to continue spending even when the price goes up slightly. Remember that suppliers usually set the price of their commodities at levels that the market will accept and levels that are also above their cost of production. This means that they are not so much in control of the prices. However, they have control over the quantity supplied into the market and so they can react accordingly to changes that affect the prices. Below is a chart that demonstrates how companies balance quantity supplied based on regular market conditions.
The demand curve moves to the right when there is an increase in demand. Subsequently, the supply curve is affected, thus resulting in the shift from A to B, signifying an increase in the quantity supplied. Suppliers want to achieve optimal quantity supplied where consumers purchase the entire quantity supplied.
Quantity Supplied vs Supply – What’s the difference?
Supply and quantity supplied in economics are two different things. Supply usually indicates the amount of commodities or services that are available in the market at any given time and also at different prices.
The quantity supplied is the amount of goods or services provided at a specific price, and this is usually dictated by market forces or by the governing authorities. Supply thus focuses on the entire spectrum while quantity supplied focuses on a single point in the supply and demand curve.