3.2 Supply

What determines the supply of any given product? Why do Canadian oil
producers extract and sell more oil when the price of oil increases? Why
do Canadian cattle ranchers raise and sell more beef when the price of
cattle feed falls? We start by developing a theory designed to explain the
supply of some typical product.

Quantity Supplied

The amount of some good or service that producers want to sell in some
time period is called the quantity supplied of that product. Quantity
supplied is a flow; it is so much per unit of time. Note also that quantity
supplied is the amount that producers are willing to offer for sale; it is not
necessarily the amount that they succeed in selling, which is expressed by
quantity sold or quantity exchanged.

As a general rule, any event that makes production of a specific product
more profitable will lead firms to supply more of it. The quantity supplied
of a product is influenced by the following key variables: [ 4 ]

Product’s own price

Prices of inputs

Technology

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