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What is Supply?

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Supply is value that firms and individuals are willing to provide to a market for a price. This is a basic force of economics that is used to model production, prices, business cycles and a broad array of economic conditions and theories.

Supply Curve

Supply is typically modeled as a curve that shows the quantity of a good that market participants are willing to supply at a particular price level.

Supply & Demand

Supply curves are often modeled together with a demand curve that depicts the quantity that the market is willing to buy at a price. The point where these two graphs intersect is known as an equilibrium price. This represents the price and quantity that would be produced by an efficient market.

Business Cycles

As the price of a good goes up, firms and individuals have incentive to increase supply. This can take time and doesn't happen immediately as it can require building factories and other facilities such as mines. In many cases, it takes an industry years to adjust to higher prices by increasing supply. Multiple producers may invest in new capital when a price goes up. This can result in a sharp increase in supply months or years later that collapses the price resulting in declining capital investment. Industries commonly go through a cycle of high prices and undersupply followed by investment and a period of low prices and oversupply.

Supply Shocks

A supply shock is a sudden drop in supply due to factors such as war, trade wars, disruptions, disasters or the exit of firms from a market . This can result in a large price increase that occurs quickly.
In the example above, the price moves from e1 to e2 due to a supply shock such as a trade war whereby a nation cuts supply to a partner due to a dispute.

Types of Supply

Supply can include goods, services, labor, assets, securities and currency.
Overview: Supply
Value that firms and individuals are willing to provide to a market for a price.
Related Concepts

Price Economics

This is the complete list of articles we have written about price economics.
Bargaining Power
Competitive Market
Customary Pricing
Inferior Good
Law Of Demand
Market Forces
Market Value
Perfect Competition
Predatory Pricing
Price Competition
Price Floor
Price Optimization
Price Sensitivity
Price Stability
Price Umbrella
Price War
Pricing Strategy
Relative Price
Snob Effect
Sticky Prices
Superior Good
Supply & Demand
Too Cheap To Meter
Veblen Goods
Willingness To Pay
More ...
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