What the law of the sentence expresses

Economists call the offer the volume of products that have the opportunity to put on the market manufacturers. The main purpose of the functioning of any commercial unit is to make a profit. Therefore, the law of supply expresses the relationship between the volume of output and the level of prices. Ordinary logic suggests that it is directly proportional. In an effort to increase profits, commercial firms have a huge incentive to increase production, if prices rise.

Description and determining factors

The proposal is a fundamental economic concept. It describes the total volume of a certain product and service that is available to the consumer at a certain price. Demand, on the other hand, describes how many products actors are willing to buy. Naturally, they want to pay less. Therefore, between demand and price, one can observe an inverse relationship. The proposal is influenced by the following factors:

• The price of the product itself. The bigger it is, the stronger the producers increase the volumes of output.
• Prices for related products. For the purposes of analyzing the proposal, they include everything that is used in the production of the products of interest. For example, paper is made of wood. Therefore, it can be considered as a concomitant commodity when considered in this case. If the price of it increases, this leads to an increase in the cost of producing paper. Therefore, her proposal will decrease. As the accompanying goods, sometimes also consider products that the firm could produce with the same factors. For example, the company produces leather belts. However, it is quite possible that it would be much more profitable for her to produce cases for phones. Therefore, the company in this situation can reduce the supply of belts. Also, the volume of output is affected by the price of complementary goods.
• Production conditions. New technologies allow you to produce more with less.
• Expectations. If the producers believe that in the near future the demand for the goods they produce will increase, they can advance the supply in advance.
• Prices of factors. The more they are, the less firms can produce.
• Number of suppliers on the market. The increase in their number leads to an increase in competition and a decrease in prices.
• Policy of the state and legislation. This factor can lead to a shift in the supply curve both to the right and to the left.

Historical development of the concept

For the first time, the law of supply and demand was formulated by John Locke. He gained popularity after the publication of the famous work of Adam Smith in 1776. What the law of the sentence expresses was first depicted graphically in 1870. However, in detail he considered Alfred Marshall in the 1890s. Demand and supply are not studied separately, but in mutual influence.

The essence of the concept

The supply law expresses the relationship between price increases and output. Its popularization is connected with the industrial revolution. She allowed to see that there is a direct link between prices and volumes of products. And it is directly proportional. This means that rising prices, with other constant factors, always leads to an increase in supply. And this is quite understandable, because firms are striving to increase their own profits. Thus, briefly, the proposal law expresses a positive relationship between output volumes and price. This is the cause of the upward slope of the curve. When prices fall, output volumes decrease.

Mathematical Definition

The law of the offer expresses the relationship between prices and output. Therefore, it is these parameters that must be added to its mathematical definition. Let p and p 'be output volumes, and y and y' are the prices corresponding to them. Then the fact that the law of the sentence expresses a direct relationship between these two parameters can be written mathematically as follows: (p - p ') * (y - y') => 0. If p> p ', then y> y'.

On practice

But how is it that the law of the sentence expresses the relationship between output and prices, affects our life? For example, in the country computer engineers earn more than teachers of English philology. Since the law of the sentence expresses a direct relationship between the price level, soon more and more students will enter the faculty, which gives the first specialty than the second. In the long term, the number of engineers will increase, which will lead to equalization of salaries.

Let's consider one more example. Suppose consumers started buying more cupcakes than donuts. Where it leads? And here we can observe the law of the sentence in action. Soon the bakeries will produce more cupcakes than donuts. We apply the law of supply and the labor market. If employers pay for overtime, a smaller number of workers will want to devote additional hours to leisure.