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Financial Terms and Glossary

Supply

Supply

Supply refers to the total amount of a good or service that is available for purchase at various price levels in the market. The law of supply states that as the price of a good increases, producers are willing to supply more of it, assuming all other factors remain constant. Supply is a key component in determining market prices, interacting with demand to establish equilibrium.

Example

An oil company increases its production of crude oil as global oil prices rise, reflecting the basic principle of supply.

Key points

• The total amount of a good or service available for sale.

• As prices rise, supply typically increases (law of supply).

• Interacts with demand to determine market equilibrium.

Quick Answers to Curious Questions

How does supply influence market prices?

Higher supply typically leads to lower prices if demand remains constant, while lower supply can drive prices up.

What factors can affect the supply of a good?

Factors include production costs, technology, government regulations, and the availability of resources.

How do changes in supply impact the overall economy?

Changes in supply affect prices, production levels, and economic output, influencing inflation, employment, and overall economic growth.

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