What Is the Law of Supply?

The law of supply in western economics is a theory that says the relationship between the price of a commodity market and its supply.

Law of supply

The law of supply speaks of the relationship between price and supply. Supply is divided into production supply and sales supply. The law of supply includes the law of production supply and the law of sales supply.

Law of Production and Supply:

Under certain conditions, the price is high and the production supply is increased; when the price is low, the production supply is reduced. Certain conditions mean that production and supply can be adjusted according to price conditions. If this condition is not met, there will be no above relationship between production supply and price.

The law of production and supply corresponds to the production and supply curve. The production and supply curve is listed on both sides of the demand curve, with two.

Sales Supply Law:

On the premise that the demand curve is unchanged, the sales supply increases and the price decreases; the sales supply decreases and the price increases.

The law of sales supply corresponds to the sales supply curve. The sales supply curve coincides with the demand curve and is part of the demand curve.

The production supply is usually affected by the following six factors:

• The cost of producing goods

• Changes in input prices

• Changes in technology

• Changes in the natural environment

• obtain

  In economics, the law of supply is naturally paired with the law of demand.

  In general, there is demand first, and then supply, so we have the saying that "demand is king", but in some cases, supply can create demand, which is the famous "Say's Law". For example, we go out for breakfast every morning, some restaurants provide soy milk fritters, and some restaurants provide buns. These are all supplies to meet people's general existing needs, but unprecedented products like iPad and iPhone On the one hand, it meets the existing needs of some people; on the other hand, they create new needs for others, so we will see that iPad is in short supply. Therefore, sometimes the order of supply and demand is not clear. Whether the demand or the supply first is as vague as the chicken or the egg.

  Let us return to the law of supply. Like the law of demand, we can use the law of supply to explain some economic phenomena in real life. Take two typical examples that happened in 2010.

  First look at the situation of garlic. In 2008, the market price of new garlic was two triangular dollars per catty, and garlic farmers had to sell garlic at a loss. In September 2008, garlic stocks were sold one after another, the supply increased sharply, and prices began to fall sharply. By November 2008, the price had fallen below a dime per kilogram, far below the cost of inventory. Not only the garlic farmers lost money, but a large number of middlemen also lost money. When garlic was first listed in 2009, the purchase price was still low, and the transaction price only gradually increased after entering July. Since the second half of 2009, the price of garlic has skyrocketed like a rocket. From the original one-pound and one-two-corner to four or five yuan in May 2010, it was as high as six or seven yuan at one time. "Garlic is almost more expensive than meat!" Consumers exclaimed. Why is the price of garlic "high fever does not return"? It is not difficult to understand when we use the law of supply to analyze. According to garlic farmers in Jinxiang County, Jining City, Shandong Province (known as the hometown of garlic), "The price of garlic this year is not higher than last year, but the output is reduced by 1/3. The area of garlic planted in townships and counties in 2009 was 5.85 million mu, a decrease of 105 thousand mu compared with 2008. The average yield of dried garlic was 785.2 kilograms, which was a reduction of 311.5 kilograms compared with 2008, a decrease of nearly 1/3. It was 45.93 million tons, which was 67.71 million tons less than the total output in 2008, a decrease of 127%. As the price of garlic fell sharply in 2008, resulting in a serious shortage of garlic production in 2009, leading to a significant reduction in supply, garlic prices retaliated. This phenomenon of price fluctuations is common in agricultural products, and the law of supply can explain it well.

  Let's look at the situation of college graduates. The 2010 Blue Paper on Employment of Chinese College Students 2010, written by the Academy of Social Sciences and published by the Chinese Academy of Social Sciences Literature Press, states that law, computer science and technology, English, international economics and trade, business management, The eight majors of Chinese Language and Literature, Electronic Information Engineering, and Accounting have the largest number of unemployed for three consecutive years. An analysis of the recruitment of senior professional consultants by the domestic human resources service agency Zhilian. If the above-mentioned majors were placed five or six years ago, they are all hot majors, and graduates of these majors have high employment rates and high wages. Now it is difficult to reduce the employment of graduates of these majors. It is incredible, but if we use the law of supply to analyze, the reason is not difficult to find. It is precisely because in the past few years that schools have expanded their enrollment, most of them are popular majors expanding their enrollment, increasing the supply of talent in this area. Under the premise of constant demand, excessive supply has led to a decline in wages. As the number of people seeking employment exceeds the number of people in need, many people are still unemployed.

  The increase in pork prices in 2019 can be explained by the law of sales and supply. The demand for pork is basically unchanged in 2019. Affected by African swine fever and environmental storms, the number of pigs in stock has continued to decline, resulting in a continuous reduction in the production and supply of pigs, a continuous decrease in sales and supply, and a continued rise in pork prices.

  Since supply is to satisfy demand, supply must be supplied according to demand, otherwise supply cannot be realized. In the first step of production, we must pay attention to market demand. Market demand is changing, and supply must keep up with changes in demand.

  For the suppliers of goods, our advice is: "Good rain knows the season, when spring is happening." Provide the right goods at the right place at the right time. If this can be done, the supplier of goods will be invincible.