law of supply
DESCRIPTION
An economic principle that holds that, all else equal, the quantity of a good supplied rises as the price of the good rises and falls as the price of the good falls.
An economic principle that holds that, all else equal, the quantity of a good supplied rises as the price of the good rises and falls as the price of the good falls.
KEY INSIGHTS
Developed by economist Alfred Marshall, the law of supply asserts that the supply and price of a good are directly proportional. That is, the amount of a good that a producer or supplier will be willing to bring to market to sell at a given price at a given time will be in proportion to the price of the good. Higher prices will lead a supplier to offer more of the product in the market, whereas lower prices will lead a supplier to offer less of the product.
Developed by economist Alfred Marshall, the law of supply asserts that the supply and price of a good are directly proportional. That is, the amount of a good that a producer or supplier will be willing to bring to market to sell at a given price at a given time will be in proportion to the price of the good. Higher prices will lead a supplier to offer more of the product in the market, whereas lower prices will lead a supplier to offer less of the product.
KEYWORDS Supply, price, modeling
IMPLICATIONS
In order to manage effectively both the price and supply of an offering, marketing strategists should seek to understand the nature and extent of the price–supply relationship. While there may be deviations from the law of supply based on market and/or product characteristics that the marketer should also seek to appreciate and understand fully, the law of supply nevertheless emphasizes an important economic principle of influence to marketing strategy development and management over time.
In order to manage effectively both the price and supply of an offering, marketing strategists should seek to understand the nature and extent of the price–supply relationship. While there may be deviations from the law of supply based on market and/or product characteristics that the marketer should also seek to appreciate and understand fully, the law of supply nevertheless emphasizes an important economic principle of influence to marketing strategy development and management over time.
APPLICATION AREAS AND FURTHER READINGS
Marketing Modeling
Engl, G., and Scotchmer, S. (1997). ‘The Law of Supply in Games, Markets and Matching Models,’ Economic Theory, 9(3), 539–550.
Engl, G., and Scotchmer, S. (1997). ‘The Law of Supply in Games, Markets and Matching Models,’ Economic Theory, 9(3), 539–550.
Marketing Strategy
Low, Linda (2000). The Economics of Information Technology and the Media. Singapore: Singapore University Press.
Low, Linda (2000). The Economics of Information Technology and the Media. Singapore: Singapore University Press.
BIBLIOGRAPHY
Buchholz, Todd G. (1990). New Ideas from Dead Economists. New York: Penguin Books.
Buchholz, Todd G. (1990). New Ideas from Dead Economists. New York: Penguin Books.