What Does supply curve Mean
The idea of the supply curve is used in the field of economics. It must be remembered that a curve is a line that allows the graphical representation of a magnitude to be developed according to the values that one of its variables acquires. The concept of supply , on the other hand, can refer to goods that are put up for sale in the market.
A supply curve , in this framework, refers to the quantity of a certain product that a company is willing to sell at a hypothetical price , keeping constant the rest of the factors that could alter the quantity supplied. There is a direct link between this quantity supplied and the price: the higher the price, the higher the profit for the company, which is therefore willing to sell as much of the product as possible.
The supply curve, in short, is considered an increasing type, because the higher the price, the higher the supply will also be. It can also be described as concave towards the axis of the ordinate , and convex towards that of the abscissa; the quantities, in this case, are the prices.
In a graph, therefore, the supply curve specifies how many products the company intends to offer for each price. At a price P1 , the seller is willing to offer a quantity Q1 ; at a price P2 , it offers the quantity Q2 ; and so on.
Suppose a trouser manufacturer wants to produce and offer 1000 trousers at a price of $ 20 . If the price rises to $ 25 , the quantity supplied grows to 1,100 pants . At a price of $ 40 , the offer increases to 2,500 pants . All these values , in a graph, allow to obtain the supply curve.
There is also the demand curve , which is defined as the graphical representation of the relationship between the maximum quantity of a given good or service that a consumer would like to buy, and its price. Both curves are key for the theoretical analysis of the economy when studying prices.
From the intersection of the supply curve and the demand curve , the price of the product arises in the market, according to neoclassical economic theory. This intersection also marks the balance between supply and demand.
Among the various concepts related to this topic is elasticity , which can be defined as the percentage in which the quantity of goods offered varies at the moment in which the sale price undergoes a variation of one percent. Elasticity belongs to the field of economics and its creator was Alfred Marshall , an English-born economist.
Marshall relied on physics to find this variation (positive or negative, depending on the case) that occurs when one variable changes for another. It is important to note that the elasticity of the supply curve is linked to several factors, such as the availability of the necessary resources and the technological level of the company.
A nuance that we must clarify is that when we speak of the supply curve, it is understood that the offer to which reference is made belongs to a single company, to the quantities of a product or service and their respective prices; If, on the other hand, the quantities offered by all the companies in a particular market or sector are taken into account , then the appropriate concept is the market supply curve (it could also be that of the industry , depending on the case). This concept, in other words, represents the quantities that are put up for sale in a given market, at each price.