In this section, supply of a good or service is described and defined.
After you have worked through this section of the learning unit, you should be able to:
- describe the meaning of supply in words
Behind the decision to supply goods and services is the profit motive. The objective of a firm is to maximise its profits. Any factor that influences the profit of a firm will affect its decision to supply more or less of a product or service.
For our purposes, the supply of a good or service can be defined as follows:
Supply is the quantities of a good or service that potential suppliers are willing and able to supply during a certain period.
In the rest of the learning unit, we use the symbol Qs to indicate the quantities of a good or service supplied.
Watch the following video clip on the meaning of supply:
Activity
Do the following activity about the meaning of supply:
Indicate whether the following statements are true or false:
Suppliers supply products to the market because they like to do good deeds.
Think again. The statement is false.
The statement is indeed false.
The objective of the business is to maximise profits, and it is for this reason that suppliers are willing to supply goods and services.
If there is a demand for a product, it will be supplied.
Think again. The statement is false.
Demand is important, but firms will only supply a product if they can make a profit from it. Even if there is a demand and it is not possible to make a profit, firms will not be willing to supply the product.
The statement is indeed false.
Demand is important, but firms will only supply a product if they can make a profit from it. Even if there is a demand and it is not possible to make a profit, firms will not be willing to supply the product.
Supply refers to the quantity of a good that is available in a particular shop.
Think again. The statement is false.
Supply refers to the quantities of a good or service that all potential suppliers are willing and able to supply during a certain period.
The statement is indeed false.
Supply refers to the quantities of a good or service that all potential suppliers are willing and able to supply during a certain period.
Supply refers to the quantities of a good or service that producers plan to sell at different prices.
The statement is indeed true.
Supply refers to the quantities of a good or service that potential suppliers are willing and able to supply during a certain period.
Think again.
Supply refers to the quantities of a good or service that potential suppliers are willing and able to supply during a certain period.