We explain supply, its characteristics, and how it relates to demand. Also, what are the elements that determine it?
What is the offer?
The term offer comes from the Latin offer, which means to offer. This word has several meanings; one of them could be defined as the promise to fulfill or deliver something. It can also be understood as a price reduction. But where the concept acquires greater importance is in the Economy, where it is understood as one of the engines of the market.
The offer can be defined as the number of goods and services that the different organizations, companies, or people have the capacity and desire to sell in the market, in a certain period and space, in a particular financial value, to satisfy wants and needs.
The law of supply is understood as the variation in the availability of goods and services in a market, whose changes are closely linked to the change in prices. If prices are high, supply increases; however, if prices fall, supply will do the same.
Some critical elements of the offer are as follows:
- Sale provision. In this case, we talk about the wishes of the seller or producer to offer his merchandise or service. These wants are usually determined by supply prices, as explained in the law of supply. If prices are high, sellers want to offer their goods or service. Otherwise, many times you choose to keep it.
- Sellers. Regarding sellers, reference is made to physical subjects or any organization or company that can offer goods and services.
- Quantity. In this case, reference is made to the precise number of each product or service sellers wish to offer in the market.
- Sales capacity. This element does not depend on the will of the sellers but instead on what they have the possibility of producing or offering in a certain period and at a specific price.
- Wants and needs. When we talk about buyers’ wishes, we are not about specific needs but desires. For example, I want a jacket or jacket of a particular brand. On the other hand, the conditions are specific basic requirements of the people they have been deprived of, for example, the need for shelter.
- Market. This is where goods and services can be exchanged for money. This space can be physical or virtual, for example, through the Internet.
- Lapse of time. In this case, reference is made to the cycle in which the goods and services can be found on the market. It can be weeks, months, or years.
- Price. When discussing fees, reference is made to the monetary value expressed in a particular currency that the products and services have.
Offer and demand
Supply and demand are two terms that are closely linked. Concerning demand, reference is made to the number of goods and services people want to acquire. Supply is another of the engines of the market.
When these two market forces come together, they determine the number of goods and services that will be produced and at what price they will be sold. The presence of no other agent is not necessary to set the prices in the case of free supply and demand.
However, governments often intervene in the formation of prices and the availability of products or services. Various techniques can be used to do this, such as providing subsidies so that prices are lower or production increases. Other times, attempts are made to reduce that consumption or production, and tax burdens can be increased for this purpose.