The supply function. The supply function characterizes ...

Imagine an international market is simply unrealistic without a proposal. However, not every modern person knows the correct interpretation of the term, so we will try to disclose it now, and also understand what the function of a proposal is and how it affects all economic processes. The main thing is to remember that economics is a simple science, and to understand it, it is enough to imagine everything in a clear example.

The general concept of the term

Proposal is the ability and complete willingness of the manufacturer to sell their own goods and services on certain conditions. These are price indicators, which are exposed depending on the actual economic situation in a particular period of time. In turn, the function of supply is the relationship of the market supply in full and the factors determining the economic good. Here, the volume of the market supply is the entire amount of economic benefit that is supplied to the market by all functioning producers in a specific time period.

What does this offer consist of?

As you have noticed, the function of supply includes such a component as the economic good. Characterizing this concept, we can say that these are the determinants of the proposals, which determine the ability of manufacturers to exhibit and sell their goods and services at a bargain price. In this scheme, it is also important that the costs that go to the production of all these products or services do not exceed the market price, the so-called general, the price of this good. In order to make it clearer what these determinants are, we divide them into two categories. The first will include price, that is, the function of the supply of money or the price of the produced good. The second group includes such components as capital resources, labor, natural, the number of working personnel, the size of taxes, equipment, the expectation of producers, in one word - non-price factors.

Everything is understandable for each language

As a result, you can derive an ordinary everyday formula, which everyone will understand. The supply function is the aggregate of all production factors and their dependence on the price, which is now relevant for the products produced. It is easy to draw in the form of a graph (see figures), it is often represented in textbooks on economics by intricate Latin terms and notation. In fact, this indicator is strongly associated with the threshold of profitability, as well as with constant price fluctuations, which can be traced both on exchanges and in a market economy. That is why the supply function characterizes the enterprise's capacity to some extent.

Structure of the market modern economy

Now let's look at how we can determine some market data based on this economic indicator, and also approximately simulate the work of a particular enterprise. Therefore, we will dig a little into the theory of this science. The supply function characterizes the changes in the supply of the market, depending on the change in demand. Also, this function determines the prices of goods that are now relevant in different markets. In its spectrum of "actions" is also the fluctuation of supply depending on the dynamics of prices and the total volumes of production at a specific moment in which a single price was established.

Unshakable laws of finance

Every economist knows perfectly well what the function of a market offer is, or the law of supply. This is an integral part of the market economy, which is characterized by a direct correlation of the market volume of the good from the price indicator for this very good. In simpler terms, we can say that prices are rising, and along with them, the volume of supply increases. If the price policy has a diminishing dynamics, then the production volumes are also decreasing. It is on this principle that a modern market is being built, exclusively all economic and financial structures, large enterprises, small organizations and private companies operate.

Function of the sentence in action

Now let's look at how the supply functions in the economy function and how they affect the changes in various indicators and market factors. The first point is the price policy for these very factors of production. If the manufacturer has to spend more money on raw materials, on wages, equipment and other issues related to his activities, respectively, the volume of products is reduced. If the means spent on the production process are small, the costs for determinants are also reduced, and therefore there is the possibility to produce a large number of products.

The second point is the introduction of new technologies. If more advanced technology is used in production, its final volumes will increase significantly. In the event that prices for constant factors of production remain the same, the enterprise will be able to get much more profit from selling more products at the same price. Item number three - well-established management of the company. It is about the number of sellers that the company produces on the market. The more proven the product and, most importantly, than in more points (districts, cities, countries), the greater will be the turnover, hence the profit.

On the fourth point, only losses can be noted, since we will talk about taxes. In our time, the growth of these economic costs is not news for every entrepreneur. To pay it is necessary more and more: for industrial equipment, for employees and even for own profit. Thus, the costs of the production good are increased, which leads to a reduction in the total total profit. Well, in the fifth paragraph, we note the so-called forecasts of the producers themselves or their expectations. Sometimes entrepreneurs assume that the prices for the goods they produce will grow, so they produce everything in small volumes. Naturally, the behavior of exchange fluctuations and other economic and financial indices is unpredictable, so many miss. But in this business, as they say, everyone has his own policy.