Market Supply

16/04/2020 0 By indiafreenotes

The market supply is the total quantity of a good or service all producers are willing to provide at the prevailing set of relative prices during a defined period of time.  The market supply is the sum of all individual producer supplies. It is understood that “Supply” means Market Supply, unless it refers to one producer.

Market Supply Function:

Market supply function refers to the functional relationship between market supply and factors affecting the market supply of a commodity.

As discussed before, market supply is affected by all the factors affecting individual supply. In addition, it is also affected by some other factors like number of firms, future expectations regarding price and means of transportation and communication.

Market supply function is expressed as:

Sx = f (Px, Po, Pf, St, T, G, T, G, N, F, M)


Sx = Market supply of given commodity x;

Px = Price of the given commodity x;

P0 = Price of other goods;

Pf = Prices of factors of production;

St = State of technology;

T = Taxation policy;

G = Goals of the market;

N = Number of firms;

F = Future expectation regarding Px;

M = Means of transportation and communication.

Functions of Market Supply

Some of the main features of Market supply are as follows:

Before we proceed with the meaning of supply, it is important to understand some special features of supply:

  1. Supply is a desired quantity

It indicates only the willingness, i.e., how much the firm is willing to sell and not how much it actually sells.

  1. Supply of a commodity does not comprise the entire stock of the commodity

It indicates the quantity that the firm is willing to bring into the market at a particular price. For example, supply of TV by Samsung in the market is not the total available stock of TV sets. It is the quantity, which Samsung is willing to bring into the market for sale.

  1. Supply is always expressed with reference to price

Just like demand, supply of a commodity is always at a price because with a change in price, the quantity supplied may also change.

  1. Supply is always with respect to a period of time

Supply is the quantity, which the firm is willing to supply during a specific period of time (a day, a week, a month or a year).

Supply and Stock

The term ‘supply’ is often confused with ‘stock’ of the commodity. However, in economics, the two terms are different. Stock refers to total quantity of a particular commodity that is available with the firm at a particular point of time.

On the other hand, supply is that part of stock which is actually brought in to the market for sale. Stock can never be less than the supply. For example, if a seller has 50 tonnes sugar in his godown and he is willing to sell 30 tonnes @ Rs. 37 per kg, then supply is 30 tonnes and stock is 50 tonnes.

Supply Vs. Stock

  1. Supply refers to the quantity offered for sale which changes with change in price, whereas, stock indicates a fixed quantity.
  2. Supply relates to a period of time, whereas, stock relates to a particular point of time.