What is Supply? - Explained


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Demand and supply is a commonly heard name in the business and economics. When demand is depending on how mass psychology works, supply is solely depending on the manufactures or the service providers in the market.

Supply is important for business to make sustainable sales and supply is important for consumers to receive a higher bargaining power.

In economics it's important to understand the what could happen to the price if there's lower or higher supply in the market for a particular service or a product. 

Supplying What?

Supply could be anything, it could be a service or a product. Any individual or enterprise business can supply a product or a service. Hospitals are supplying medical service and hospitals are a service oriented organization. Microsoft is supplying windows operating systems which is a product of Microsoft. Insurance companies do supply a insurance product.

Understanding Demand

Understanding demand is extremely important for a organization or an individual who is in the manufacturing, agriculture and supplying industry by supplying a product or service. The sustainability of the organization or a individual's business depends on how he understand the demand in the market.

If a farmer grow apples to a market, where the market does not have a demand for apples, Farmer will get the lowest possible revenue by selling apples. If the farmer grows apples where the demand is higher and farmer could be able to get better price for apples he grow.

If there's a hospital where the population is really low which also means less demand due to less human population, the hospital could not be able to treat people because there's less or no demand.

Understanding demand could help organizations and individual businesses to work across the be at the efficient and minimum opportunity cost.

Quantity of Supply

Though a farmer grow and harvest 1000 apples a day and selling them at 0.35 per kilo doesn't mean the farmer would be able to sell 5000 apples a day at a price of 0.40 per kilo. Mass supply to the market doesn't guarantee that the supplier will be able to sell the quantity which manufactured by the organization at the same price before or higher price.

Quantity in large scale could lower the price tag of a product. By understanding demand and the supply demand graph could tell a manufacture or a supplier how the large scale supply could affect the unit price.

By analyzing the graph gives you much data which needs. The possible scenarios would be as below.

  1. Higher quantity of supply with lower demand could provide lower price tag.
  2. Lower quantity of supply with higher demand could provide higher price tag.
  3. Medium amount of supply with medium demand could provide medium price tag.
By understanding the supply demand ratio, a supplier could analyze the opportunity cost and the amount of supply which needs to send to the market to get the better price tag for the effort.

Competitors to Supply

There could be many peoples and organizations in the market who provide the same service, product as you provides. It's complicated to know the real demand in the market and as well as the other suppliers and their supply quantity of the market.

If there is another supplier who is capable of supplying twice as you and the product is in the same quality as yours, you would have to sell your stock with a lower cost.

There are small facts that sellers follow to gain more respect from the customers such as providing better customer support, better quality products as such.