What is the 'Quantity Supplied'?

In economics, quantity supplied describes the amount of goods or services that are supplied at a given market price. How supply changes in response to changes in prices is called the price elasticity of supply. The quantity supplied depends on the price level, and the price can be set by either a governing body by using price ceilings or floors or by regular market forces.

BREAKING DOWN 'Quantity Supplied'

If a price ceiling is set, suppliers are forced to provide a good or service, no matter the cost of production. Typically, suppliers are willing to supply more of a good when its price increases and less of a good when its price decreases.

Suppliers' Control Over Quantity Supplied

Ideally, suppliers want to charge high prices and sell large amounts of goods to maximize profits. While suppliers can usually control the amount of goods available on the market, they do not control the demand for goods at different prices. As long as market forces are allowed to run freely without regulation, consumers also control how goods sell at given prices. Consumers ideally want to be able to satisfy their demand for products at the lowest price possible.

Determining Quantity Supplied Under Regular Market Conditions

Graph depicting the relationship between supply and demand

The optimal quantity supplied is the quantity whereby consumers buy all of the quantity supplied. To determine this quantity, known supply and demand curves are plotted on the same graph. On the supply and demand graphs, quantity is in on the x-axis and demand on the y-axis.

The supply curve is upward-sloping because producers are willing to supply more of a good at a higher price. The demand curve is downward-sloping because consumers demand less quantity of a good when the price increase.

The equilibrium price and quantity are where the two curves intersect. The equilibrium point shows the price point where the quantity that the producers are willing to supply equals the quantity that the consumers are willing to purchase. This is the ideal quantity to supply. If a supplier provides a lower quantity, it is losing out on potential profits. If it supplies a higher quantity, not all of the goods it provides will sell.

Market Forces

Theoretically, markets should strive for equilibrium, but there are many forces that pull them away from this point. Many markets do not operate freely; instead, they face external forces, such as government rules and regulations that influence how much of a product suppliers have to provide.

Another factor to consider is the elasticity of supply and demand. When supply and demand are elastic, they easily adjust in response to changes in prices. When they are inelastic, they do not. Inelastic goods are not always produced and consumed in equilibrium.

RELATED TERMS
  1. Price Elasticity of Demand

    Price elasticity of demand is a measure of the change in the ...
  2. Law of Demand

    The law of demand states that quantity purchased varies inversely ...
  3. Law Of Supply

    Law of supply is a microeconomic law, stating that, all other ...
  4. Supply

    Supply is a fundamental economic concept that describes the total ...
  5. Microeconomic Pricing Model

    A microeconomic pricing model is a model of the way prices are ...
  6. Demand

    Demand is an economic principle that describes consumer willingness ...
Related Articles
  1. Insights

    How supply and demand affects inelastic goods

    Find out how the laws of supply and demand function for goods and services that are considered highly inelastic, including goods not yet discovered.
  2. Insights

    Introduction to Supply and Demand

    Learn about one of the most fundamental concepts of economics - supply and demand - and how it relates to your daily purchases.
  3. Investing

    What is Deadweight Loss?

    Deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
  4. Insights

    Why We Splurge When Times Are Good

    The concept of elasticity of demand is part of every purchase you make. Find out how it works.
  5. Insights

    How Central Banks Control the Supply of Money

    A look at the ways central banks pump or drain money from the economy to keep it healthy.
  6. Insights

    4 Factors That Shape Market Trends

    Discover the four major factors that shape market trends: Government, international transactions, speculation/expectation, and supply and demand. These areas are all linked as expected future ...
  7. Investing

    Invest In Quality Not Quantity

    The painful reality is that by choosing quantity over quality, the lack of quality increases the risk assumed, leading investors to sell at the first sign of trouble.
RELATED FAQS
  1. How does money supply affect inflation?

    Learn about two competing economic theories of the role of the money supply and whether money supply causes inflation in ... Read Answer >>
  2. How Does the Law of Supply and Demand Affect Prices?

    Learn how the law of supply and demand affects prices, as when one outweighs the other, prices can rise or fall in response. Read Answer >>
  3. What are some examples of demand elasticity other than price elasticity of demand?

    Learn about income elasticity of demand and cross elasticity of demand and how to interpret these two measures of demand ... Read Answer >>
  4. Which factors are more important in determining the demand elasticity of a good or ...

    Learn about demand elasticity of goods and services and the main factors that influence the elasticity of demand. Read Answer >>
  5. Is demand or supply more important to the economy?

    Learn more about the impact of supply and demand in an economy. Find out why companies study supply and demand as part of ... Read Answer >>
  6. What is the difference between consumer surplus and economic surplus?

    Learn the difference between consumer surplus and economic surplus, how the concepts are related and the important theoretical ... Read Answer >>
Trading Center