Quantity and supply are usually considered the same but they are different. Quantity is the ratio of all the units of a good that are ready to sell and those that are not ready to sell at the current price.
Quantity and supply vary if the producer is not willing to sell all the units of the good at the current price. Eg, a manufacturer has 500 units of a commodity of which he is willing to sell 300 units at the prevailing price. So the supply is considered to be 300 units. Thus, the power of the producer (or trader) to sell the commodity is the quantity and the power and willingness to sell at the prevailing price is the supply.
Thus, quantity means the proportion of total salable units of a good. Supply may be less than quantity. Quantity and production are different things. Because unsold units from previous production are also included in the quantity. Practically speaking, quantity means the number of salable units of a commodity a trader has in a shop or godown and the willingness and willingness to sell them at the prevailing price means supply.
- Factors Affecting Supply/Determinants of Supply
Factors affecting supply are divided into two main categories: (1) price of the commodity and (2) factors other than price of the commodity. Supply of a commodity is affected by the following factors:
Price of a commodity : Price is an important determining factor affecting supply. A profit-maximizing producer is willing to sell more supply of the good if the price rises and less supply if the price falls. Thus, there is a direct relationship between price and supply.
- Factors other than price of the item (other factors) :
Cost of Production Equipment: A change in production-cost affects supply. For example, the supply of a commodity increases if the cost of production decreases due to a decrease in the rent paid to the landowner, the wages paid to the laborer, or other factors. A fall in production-costs increases the possibility of rejection, thus giving producers an incentive to sell more goods, thus increasing supply. On the contrary, if the cost of production increases, the demand decreases, so the supply of the good also decreases. Thus the means of production
Level of Technology: Advances in technology save time, energy and enable higher production of quality goods at lower cost. As the cost of production decreases, the possibility of rejection by the producer increases. So the producer puts more supply in the market. Thus, technology affects supply. In any country, if modern technology is used, the supply of goods is seen to be higher
Speculation of future prices; Speculation about the price of a commodity affects the supply of the commodity. If there is speculation that the price of a commodity will rise in the future, the producer will put less supply of that commodity in the market, on the contrary, if there is a speculation among the producers that the price of some commodity will fall in the future, the producers will put more supply of that commodity in the market in order to charge a higher price of that commodity.
Other Factors : An increase in the number of firms producing a good increases the supply of a good, a decrease in the number of firms decreases the supply of a good. Supply increases if natural factors are favorable in the country, political stability, law and order is maintained. If political stability is threatened, the supply of the commodity decreases. If there is industrial peace in the country, harmonious relations between owners and workers, the supply of goods increases. This in turn reduces supply. Supply increases as traffic develops. This in turn reduces supply.
