We explain what supply is, its characteristics and how it relates to demand. Furthermore, what are the elements that determine it.
What is offer?
The term offer comes from Latin offerre, what does it mean offer. This word has various meanings, one of them could be defined as the promise to fulfill or deliver something. Also can be understood as a price reduction. But where the concept acquires the greatest importance is in Economics, where it is understood as one of the drivers of the market.
The offer can be defined as the amount of goods and/or services that different organizations companies or people have the capacity and desire to sell in the market, in a certain period of time and space, at a particular pecuniary value, in order to satisfy desires and/or 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; conversely, if prices fall, supply will do the same.
See also: Purchasing power
Offer elements
Some key elements of the offer are the following:
- Sale provision In this case we talk about the wishes of the seller or producer to offer their merchandise or service. These desires are usually determined by the supply prices, as has been explained in the law of supply. If prices are high, sellers want to offer their good or service. Otherwise, many times it is decided to keep it.
- Sellers When talking about sellers, reference is made to physical subjects or to any type of organization or company that has the capacity to offer goods and/or services.
- Amount In this case, reference is made to the precise number of each product or service that sellers wish to offer in the market.
- Sales capacity This element does not depend on the will of the sellers but rather on what they have the possibility of producing or offering in a certain period of time and at a certain price.
- Desires and needs When talking about buyers' desires, we are not talking about specific needs, but rather desires. For example, I want a jacket or jacket from a certain brand. On the other hand, needs are certain basic requirements of people of which they have been deprived, for example the need for shelter.
- Market This is the place where goods and/or services can be exchanged in exchange for money. This space can be physical or virtual, for example through the Internet.
- Time lapse In this case, reference is made to the cycle in which goods and/or services can be found in the market. It could be weeks, months, years.
- Price When talking about prices, reference is made to the pecuniary value expressed in a certain currency that the products and/or services have.
Supply and demand
Supply and demand are two terms that are closely linked. When we talk about demand, we refer to the quantity of goods and/or services that people want to acquire. Supply is another of the market drivers.
When these two market forces come together, they are the determinants of the quantity of goods and/or services that will be produced and at what price they will be sold. The presence of any other agent is not necessary to set the prices in case of free supply and demand.
However many times governments decide to intervene in price formation and in the availability of products or services. To do this, various techniques can be used, such as the provision of subsidies so that prices are lower or production increases. Other times, attempts are made to reduce consumption or production and to do so, tax burdens may increase.
