# Offer (economics)

Linear supply curve that reaches the equilibrium price at the intersection with the demand curve

In economics, supply is the amount of any kind of goods and services that economic agents are willing to sell as sellers on a market at a certain price in exchange for money or other goods and services . The supply contrasts with the demand .

## General

Companies , the state with its subdivisions ( public administration , state-owned companies ), but also private households ( consumers ) can be considered as supplying economic entities. As providers, they are all original market participants . The definition of the offer presupposes the homogeneity of the respective considered good, since only then can one speak of different quantities of a good and only in this way can the offer of different economic subjects be summarized in terms of quantity and the quality demanded. In a derived sense, one also speaks of the aggregated supply of different goods, for example of a whole branch of industry or the whole economy , which is determined as the sum of the price-valued supply of the individual goods ( total supply ).

Supply is not always unlimited; it is limited by operational capacities and therefore - if there is a demand - leads to a shortage of goods. Only free goods like air show no scarcity, because they are available in the relevant area in such large quantities at the observed time that everyone can consume as many units of the good as they want, or until their saturation level is reached. Economic goods, on the other hand, are defined by their scarcity (and therefore also called “scarce goods”), because they are not available at any time and in any desired quality ( product quality / service quality ) and quantity ; the offer refers to these.

## history

Richard Cantillon systematically combined demand and supply or income generation and use of income for the first time in 1755 . According to this, the market price depends on supply and demand and can temporarily be above or below the natural price because of market developments because it is difficult "to adapt the production of goods and food to use". In 1757, the physiocrat François Quesnay looked primarily at agriculture , whose range of agricultural products is limited by the soil ( French bien-fonds ), its constant improvements by land costs ( French avances foncieres ) and cultivation . With suitable cultivation, every soil produces a “natural” surplus over the production costs as a net yield ( French: produit net ). He realized that both labor and capital were required to create a significant amount of goods. Victor Riquetti said in 1758 that supply and demand were around the level of the natural price ( French prix naturel ). In his book The Wealth of Nations in March 1776, Adam Smith assumed that the supply of goods would naturally adapt to the effective demand. With David Ricardo , too, the market price was determined by the relationship between supply and demand; he refers to Smith for the representation.

The Saysche theorem , developed by Jean-Baptiste Say in 1803, assumed that an increased supply of goods was always offset by a correspondingly increased demand and thus there could be no lasting unemployment . He assumed that the supply creates its own demand. His conclusion that there could be no overproduction was based on the assumption that products were exchanged for products. Thomas Robert Malthus expressly contradicted Quesnay and Say in 1820 and countered them that increased production would only be useful if there was a demand for their products. John Stuart Mill affirmed in 1848 that there could be no overproduction (i.e. oversupply) and therefore disruptions could only occur if production ignored demand or if there were shifts within the demand structure. For Mill, "all sellers are inevitably and logically buyers". Karl Marx claimed in 1865 that “demand and supply [supply, i. Ed.] Constantly determine the prices of goods, never or only coincidentally ”.

John Maynard Keynes contradicted his colleagues Say and Mill in his book General Theory of Employment, Interest and Money , published in February 1936, and held that macroeconomic imbalance was the norm. For him, the overall economic demand determined the supply; unemployment was the result of insufficient effective demand.

## species

On all submarkets , there are supply and demand, the offer is on the goods market specifically supply of goods , on the labor market labor supply , on the money market money supply or on the capital market capital supply . The job offer on the labor market is often misleading for laypeople, because economists understand this to be jobseekers who offer their work to employers . Like all employees, they divide their total available time (measured in hours) into free time and working time : ${\ displaystyle T}$ ${\ displaystyle F}$ ${\ displaystyle H}$

${\ displaystyle T = H + F}$.

The more they increase their job offer, the less free time they have and vice versa. Your increasing work suffering must be compensated by the wages . From the point of view of the unemployed, job search represents a loss of benefit from lost leisure time.

## Economic aspects

The supply function establishes the relationship (in the form of a function ) between the price of a good and the amount of goods offered. This supply function is based on a supply law and a demand law . According to the supply law, the supply is usually large when prices are high, and low when prices are low. The supply curves are therefore increasing ( law of supply ). While a rising course of the supply curves for the goods supply of a company can be derived from the neoclassical theory of the company with suitable assumptions (in particular the assumption of falling economies of scale ) , the increasing supply of production factors (such as wage labor ) does not follow from the neoclassical theory of private households . Whether z. For example, it is controversial that a drop in labor supply can also be empirically observed with wages. According to the law of demand, the amount of goods demanded generally increases when the price of the goods falls, and conversely, the amount of goods demanded decreases when the price rises. When the market price is comparatively low, only the cheapest providers offer small quantities at least at their lower price limit and vice versa. Frontier sellers are the market participants who can just sell at their supply threshold.

From the offer function

${\ displaystyle x_ {a} = f (p)}$

and the demand function

${\ displaystyle x_ {n} = f (p)}$

the following equilibrium function can be derived:

${\ displaystyle x_ {a} -x_ {n} = 0}$

There are: the supply quantity the demand quantity the market price. Correspondingly, if there is an oversupply, the price will fall towards the equilibrium price, and if there is excessive demand, it will increase accordingly. The equilibrium price also fulfills all price functions .
${\ displaystyle x_ {a}}$
${\ displaystyle x_ {n}}$
${\ displaystyle p}$

In microeconomics, the (short-term) supply function shows the respective profit-maximizing production quantities for alternative product prices (which the company cannot influence in perfect competition : quantity adjusters ). It is the ascending branch of the marginal cost function starting in the operating minimum and is obtained from the price-marginal cost rule . Price- setting companies ( price leadership ) have no supply function. The supply function of an industry is obtained by aggregating the supply functions of the individual companies. The longer the observation period increases, the greater the elasticity of the offer.

In the economic analysis, it should be noted that with an increasing degree of aggregation (i.e. the more individual economic subjects and individual goods are grouped together), the ceteris paribus clause becomes more and more problematic, since it can no longer be assumed that other circumstances ( income , supply structure ) remain unaffected by changes in prices and supply quantities that can be represented in an aggregated supply function or curve. General equilibrium models circumvent this difficulty .

On the other hand, supply is abnormal when there is a large supply when prices are low and low when prices are high. The causes can be the "anti-cyclical reaction" of the agricultural product supplier or the preference -based job offer of a job seeker . As part of the “anti-cyclical reaction”, farmers try to compensate for a loss of income due to falling agricultural prices by increasing supply . This can lead to an excess supply . The abnormal labor supply can rise when real incomes fall , because the use of leisure time falls, so that the demand for a minimum wage arises. First, as in the normal course, the labor supply decreases as the wage rate falls. But if the wage to be achieved becomes too low to survive, the workers affected are forced to work more in order to be able to secure their livelihood. There is an expansion of the job offer in this area.

## Individual evidence

1. Arthur Woll, Allgemeine Volkswirtschaftslehre , 12th edition, 1996, p. 50 f.
2. Verlag Dr. Th. Gabler, Gabler Wirtschaftslexikon , Volume 3, 1984, Sp. 1925
3. ^ Richard Cantillon, Essai sur la Nature du Commerce en général , 1755, p. 240
4. ^ Richard Cantillon, Essai sur la Nature du Commerce en général , 1755/1931, p. 17
5. ^ François Quesnay, Grains ( German  grain ), in: Denis Diderot / Jean-Baptiste le Rond d'Alembert (ed.), Encyclopédie vol. 7 , 1757, p. 104
6. Victor Riquetti, L'Ami des hommes, Ou Traité de la Population , 1758, pp. 119 ff.
7. ^ Adam Smith, An Inquiry into the nature and Causes of the Wealth of Nations , Volume 1, 1776/1960, p. 50
8. ^ Wilhelm Stoffel, Wirtschaft und Staat with Adam Smith and David Ricardo with special consideration of the state intervention , 1933, p. 21
9. ^ Jean-Baptiste Say, Traité d'économie politique , Book I, 1803, pp. 141 f.
10. ^ Thomas Robert Malthus, Principles of Political Economy , 1820, p. 533
11. John Stuart Mill, Principles of Political Economy , Volume II, 1848/1921, pp. 109 ff.
12. ^ Karl Marx, Das Kapital Volume III , MEW 25, 1865, p. 73
13. ^ John Maynard Keynes, General Theory of Employment, Interest, and Money , 1936, p. 16
14. ^ Ronnie Schöb, Tax Reform and Profit Participation , 2000, p. 52
15. Verlag Dr. Th.Gabler, Gablers Wirtschafts-Lexikon , Volume 1, 1984, Col. 178
16. ^ Walter Kortmann, Microeconomics: Application-related Basics , 2002, p. 332
17. Constantin von Dietze , Zwangssyndikate als Mittel der Agrarpreispolitik , in: Jahrbücher für Nationalökonomie und Statistik, Volume 146, 1937, p. 137
18. Edwin Böventer / Richard Illingworth, Introduction to Microeconomics , 9th edition, Oldenbourg, 1997, p 133