Explained: Supply, supply schedule and supply curve

Supply is defined as the specific product available to the market for consumption. Demand is the amount of a specific product a consumer can purchase at each price. The supply and demand are deeply correlated. These two concepts of supply and demand are tangled to create market equilibrium which defines the availability of goods in the market and the prices they are sold for.

Law of supply: The law of supply describes that when the price of a product increases supply also increases and vice versa. However, if there is an oversupply, the price of that product will decrease. If there is an under-supply, the price of that product will increase. This basic principle of the law of supply helps the producers/suppliers to ensure that a certain number of their products is made available to the market at different price levels to meet the needs of consumer demand to increase the profit margin of a business.

Supply schedule/supply curve: The supply schedule shows the quantity of goods suppliers are willing to sell at each market price. The supply schedule shows the relationship between the price and quantity of goods supplied in a table format. Sometimes the supply curve is called a supply schedule because it is a graphical representation of the supply schedule.

The supply curve is typically upward-sloping because as prices increase, producers are willing to supply more of a good or service. In economics, the law of supply states that all else being equal, an increase in price results in an increase in the quantity supplied. This is the precise relationship between demand and price. Generally, the demand curve slopes downward (i.e. its slope is negative) because the number of unit demands increases with a fall in price and vice versa. Higher prices result in lower demand whereas low prices result in higher demand.

Illustration of supply schedule/supply curve:

The above supply curve maps the relationship between price and quantity supplied by being shown as an upward-sloping line.

Essentially, there are two types of supply curves namely individual supply curves and market supply curves. They are further divided into short-term supply, long-term supply, joint supply, and composite supply.

Individual supply curve: The individual supply curve shows various quantities of commodity that an individual producer or supplier is willing to supply at different prices during a given time, assuming other factors affecting supply remain unchanged. It is also known as a single producer’s supply curve.

Market supply curve: A market supply schedule or curve shows various quantities of a commodity that multiple producers or sellers supplied at each price level for the entire market of a particular good, holding other factors affecting supply constant. It works similarly to an individual supply schedule for a company in that there are typically more goods supplied as price increases.

Example of Marker supply schedule/curve:  Let there be 3 suppliers A, B, and C supplying a product at a specific price during a given specific time as under:

The market supply schedule is the horizontal sum of all individual supply schedules.

The market supply curve shows the combined quantity supplied of goods at different prices. The above table also shows that when the price of a product increases their market supply also increases and vice versa. The market supply schedule can be used to produce a market supply curve.

Supply is often broken into short-term and long-term supply, joint supply, and composite supply though there are other types of supply.

Short-term supply: The ability of consumers to buy products is restricted by available supplies. They cannot buy beyond the supplied goods.

Long-term supply: The factor of availability of time when demand changes which gives the supplier a way to adjust to the quick change in demand.

Joint supply: The supply of products produced and sold jointly.

Composite supply: The supply of a product through its different sources, where the product serves more than one purpose.

Supply and demand-related Posts: