Supply implies the quantity of a commodity, which suppliers are ready to offer for sale at a definite price over a period of time. In other words, supply is what the supplier is able and willing to offer for sale to the customers. In contrast, quantity supplied implies the amount of a particular commodity that the firm is willing and able to make available for sale at the given price at the given period of time.
The seller of the product represents the supply side of the commodity. This may include firms, governments, or even individual producers.
The terms ‘supply’ and ‘quantity supplied’ are interrelated concepts in economics.
This content attempts to explain the difference between supply and quantity supplied.
Contents: Supply Vs Quantity Supplied
- Comparison Chart
- Key Differences
- Law of Supply
- Change in Supply and Change in Quantity Supplied
- Determinants of Supply
|Basis for Comparison||Supply||Quantity Supplied|
|Meaning||Supply implies the overall relationship amidst different prices and quantity supplied at each price.||Quantity supplied is the amount of product offered for sale in a given period at a particular price.|
|Represents||How much the market can offer.||Amount of good made available by the producers when receiving a certain price.|
|Reflected by||Supply schedule or supply curve||Point given on supply curve|
|Change is a result of||Change in non-price determinants||Change in price|
|Change is indicated by||Shift of entire supply curve||Movement along the supply curve|
Definition of Supply
Supply refers to the whole schedule of quantities of the commodity which seller offers for sale, at all possible prices.
These prices are already given for the day, week or month while other factors remain constant.
- It is a combination of both willingness and ability of the producer to supply.
- It is a flow concept.
Noting that the actual sale of that commodity is not the same as its supply.
For example, A farmer who is a producer of potatoes is ready to sell kgs of potato at a price of 20 Rs. per kg, but he is able to sell only 60 kgs of potato. So, here 100 kgs represent supply, while 60 kgs represent sale.
- Quantity of the good which the seller is willing to supply.
- Price at which the seller is ready to supply the quantity of that good.
- The period during which the seller is willing to supply that quantity.
What are the three ways to express supply?
The three ways to express the supply of commodity by the firm or market are:
It is an algebraic expression that states the individual supplier’s behaviour. This reflects what the supplier firm offers in the market at the given price.
It is a tabular presentation of different quantities which the firm offers for sale. The firm offers these quantities at different prices at a given period of time. It explains how the quantity supplied of a good is related to its prices. Noting that there is no change in its non-price determinants.
It is the graphical representation of the information presented in the supply schedule.
Definition of Quantity Supplied
Quantity Supplied refers to the total quantity of a good which the supplier decides to produce and sell in the given circumstances.
- It indicates the quantity of the product, which the seller is able and willing to sell at a definite price.
- It represents a point on the supply curve which we are referring to.
In general, the supply of a commodity varies directly in relation to its price. This means that at higher prices the firm supplies more quantity of a commodity and vice versa.
With the help of this supply schedule, we will plot the supply curve
A functional relationship exists between the quantity supplied and the price of a commodity. Plus, it displays:
- The maximum possible quantity which the supplier willingly supplies at each price.
- The minimum price encourages suppliers to offer different quantities for sale.
Key Differences Between Supply and Quantity Supplied
Below we will discuss the differences between supply and quantity supplied:
- Supply is the basic concept in economics. It implies the different quantities that the producer is willing to sell at various possible prices. But, quantity supplied is the total amount of commodity which suppliers will offer, at a particular market price.
- Supply represents how much the market can offer at different prices. In contrast, quantity supplied represents what amount of commodity producers will supply at a specific price.
- The supply schedule or supply curve indicates the supply of the commodity. Whereas the quantity supplied is reflected by the point given on the supply curve.
- The supply curve tends to shift when it encounters a change in non-price determinants. This influences the supplier’s willingness to sell the product. Non-price determinants may include:
- Cost and technology
- Price of related goods
- Future expectations about prices
- Size of the industry
- Number of sellers
- Weather conditions, etc.
On the contrary, a change in the quantity supplied is a result of the change in the price of the product.
- A shift in the entire supply curve indicates a change in supply. Whereas the change in quantity supplied results in a movement along the supply curve.
Law of Supply
It states that the producer will produce and offer more quantity of a commodity as the price of that product or service increases. However, other determinants are constant. Consequently, the change in the price of the commodity is the cause. And its effect can be seen in the change in the supply of that commodity.
Also, high prices encourage a firm to produce or sell more.
- The relationship between quantity supplied and the price is direct and positive.
- Supply curve slopes in the upward direction towards the right. This is because of the positive relationship between quantity supplied and price.
- We can also say that supply of a commodity is directly related to its price.
Change in Supply and Change in Quantity Supplied
Non-price factors determine the supply curve’s location. This location refers to the distance from the point of origin. However, price of the commodity determines the slope of the curve. Hence, supply changes in two circumstances:
Movement along the supply curve
When there is an increase in the supply of the commodity due to the increase in its price. This concludes that there is an increase in the quantity supplied. So it leads to the movement towards the upward direction on the supply curve and in the right.
When there is a rise in the market price this results in an expansion of supply. But when there is a fall in the market price of the commodity, this results in contraction of supply. This discourages the producers to offer products for sale in the market.
Movement from one supply curve to another
Also known as a shift in the position of the entire supply curve. When there is a change in the supply of the commodity but there is no change in its price. This depicts that the supplier shift from one supply curve to another.
Such a movement is the increase in supply. In this, the producer moves towards the right in the outer supply curve.
In contrast, when the movement is towards the left in the inner supply curve, it portrays the ‘reduction’ in supply.
An increase in supply depicts the bodily shift of the supply curve towards the right. This takes place due to the change in non-price determinants. In this situation, producers offer more quantity of the product at the same price.
A decrease in supply portrays the bodily shift in the curve towards the left. This happens because of the change in non-price factors. And in this situation, less quantity of the commodity is offered for sale, at the given price.
Also Read: Difference Between Demand and Supply
Determinants of Supply
The determinants of supply are discussed as under:
- Price of the Product: When the price of the good offered for sale is high, the supplier will supply more quantity. This happens because firms produce goods and services with an aim of earning profits. It encourages the suppliers to produce more goods to earn maximum profits.
- Prices of Other Goods: The hike in the prices of other goods encourages the firm to produce and sell them. The producers will use more of their resources to produce and sell more profitable goods.
- Price of input: Input implies factors of production labour, land, capital, and so forth. When there is a hike in the price of the input, it results in a decrease in supply. When the cost of input is low, often makes the production more profitable. It motivates the existing suppliers to raise production levels. Also, new firms may join the race.
- Technology: State of technology also determines the supply of products. Suppose the firm starts using better technology in the production of goods. This leads to an increase in production, with the same amount of resources utilized.
- Government Policy: Government imposes different rules and regulations. These rules govern what the firms can sell and also how much they can sell. Further, the government levies taxes at different stages of production and sale. This increases the overall production cost. So, there will be an increase in the quantity supplied when the price rises.
- Industry Size: Industry size and the number of competitors influence the quantity supplied. This implies, in a competitive industry, the supply of the product is generally more. Whereas with a monopolistic industry, the supply is comparatively less.
- Future Expectations: The firm decides when the product would be sold in the market, i.e. at present or in the future. This depends on the forecast for future prices. Expectation about the increase in future price will decrease the current supply and vice versa.
The supply of a commodity depends on other factors also. These factors are natural factors, man-made factors, infrastructural facilities and firm goals.