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. Quantity Demanded

    A term used in economics to describe the total amount of goods ...
  2. Supply Curve

    A supply curve is a representation of the relationship between ...
  3. Inelastic

    Inelastic is a term used to describe the unchanging quantity ...
  4. Demand

    Demand is an economic principle that describes consumer willingness ...
  5. Invisible Supply

    Invisible supply refers to an unknown amount of stock of a commodity ...
  6. Cross Elasticity of Demand

    Cross elasticity of demand measures the responsiveness in the ...
Related Articles
  1. 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.
  2. Investing

    What is Deadweight Loss?

    Deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
  3. 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.
  4. Investing

    Why You Can't Influence Gas Prices

    Neither big oil companies nor consumers are responsible for oil prices: it's basic economics.
  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

    What is Microeconomics?

    Microeconomics deals with individual and small business economic decisions.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. What are some examples of the law of demand in real markets?

    Find out how the price of a good or service affects the quantity demanded, and explore instances of consumption reflecting ... Read Answer >>
  4. How does price elasticity affect supply?

    Read more about the price elasticity of supply, the law of supply and why a price change would alter the distribution of ... Read Answer >>
Hot Definitions
  1. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  2. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  3. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  4. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  5. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  6. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
Trading Center