What Is Supply In Economics And How Is Price Of A Product Determined?
Supply in economics is the amount or quantity of a resource or product produced by the producers, labourers of the product that is demanded by the consumers.
The amount of supply is based on the ratio of the demand made by the consumers.
Supply can be in labour time, raw materials to make a product, can be of goods, or any other valuable object.
What Is The Supply Based On?
The amount or quality of supply for a specific good or service and its demand patterns are based on the consumer’s personal preferences, price of the goods or services demanded and their utility to the consumers.
The supply that is provided by the producers of the specific goods/products will rise if the prices of the goods in demand rises as all firms look to maximise profits.
How Is The Price Of A Product Determined?
The price of a good or a product is determined based on the interaction between the sellers and the consumers that outlines the supply and demand in the market.
The resulting price from this interaction is referred to as the equilibrium price which represents an agreement between the consumers and the producers of the goods.
When there is equilibrium the quantity of a good supplied by the producers of such goods is equal to the quantity demanded by the consumers.