It is simply unrealistic to imagine an international market without an offer. However, not every modern person knows the correct interpretation of this term, so we will now try to disclose it, as well as understand what is the function of the proposal and how it affects all economic processes. The main thing is to remember that economics is a simple science, and to understand it, you just have to imagine everything with a good example.
General term
A proposal is the ability and readiness of a manufacturer to sell their own goods and services on certain conditions. These are price indicators that are set depending on the actual economic situation in a particular period of time. In turn, the function of the offer is the relationship of the market supply in full and the factors that determine the economic good. Here, the volume of market supply is the entire amount of economic good that is supplied to the market by all functioning producers in a specific time period.
What does this offer consist of?
As you noticed, the supply function includes such a component as an economic good. Characterizing this concept, we can say that these are the determinants of offers that determine the ability of manufacturers to exhibit and sell their goods and services at a bargain price. In this scheme, it is also important that the costs that go into the production of all these products or services do not exceed the market, so-called total, price of this good. In order to make it clearer what these determinants are, we will divide them into two categories. The first will include price, that is, the function of offering money or the price of the produced good. The second group includes such components as capital resources, labor, natural resources, the number of workers, taxes, equipment, manufacturers' expectations, in a word - non-price factors.
Everything is clear for every language
As a result, we can derive an ordinary everyday formula, which everyone will understand. The supply function is the totality of all production factors and their dependence on the price, which is now relevant for manufactured products. It is easy to draw in the form of a graph (see drawings), it is often presented in textbooks on economics with intricate Latin terms and symbols. In fact, this indicator is strongly associated with the threshold of profitability, as well as with constant fluctuations in prices, which can be traced both on exchanges and in a market economy. That is why the offer function characterizes to some extent the capacity of the enterprise.
The structure of a modern market economy
Now we will consider how it is possible, being guided by the named economic indicator, to determine some market data, and also approximately to model work of the concrete enterprise. Therefore, a little deeper into the theory of this science. The supply function characterizes the changes in the supply of the market depending on changes in demand. Also, this function determines the prices of goods that are currently relevant in various markets. In its spectrum of “actions” there is also a fluctuation of supply depending on price dynamics and total production volumes at a particular moment at which a single price is established.
Unshakable laws of finance
Every economist knows very well what the function of market supply, or the law of supply, is. This is an integral part of a market economy, which is characterized by a direct relationship between the market volume of the good and the price indicator for this very good. In simpler terms, we can say that prices are rising, and with them the supply volume is increasing. If the pricing policy has diminishing dynamics, then production volumes are also declining. It is on this principle that a modern market is built, exclusively all economic and financial structures, large enterprises, small organizations and private firms work.
Offer function in action
Now we will consider how exactly the supply functions in the economy act, and how they influence changes in various indicators and market factors. The first point is the pricing policy for these very factors of production. If the manufacturer has to spend more money on raw materials, on wages, on equipment and other issues related to his activities, respectively, the volume of output decreases. If the funds spent on the production process are small, the costs of determinants are reduced along with them, therefore, it is possible to produce a large number of products.
The second point is the introduction of new technologies. If more sophisticated technology is used in the production, its final volumes will increase significantly. In the event that prices for constant factors of production remain the same, the company will be able to get much greater profit from the sale of more products at the same price. Point number three - established company management. We are talking about the number of sellers that the company puts on the market. The more recommended the product will be and, most importantly, than in a larger number of points (regions, cities, countries), the greater the turnover will be, therefore - the profit.
On the fourth point, only losses can be noted, since we will talk about taxes. Nowadays, the growth of these economic costs is not news for every entrepreneur. You have to pay more and more: for production equipment, for employees and even for your own profit. Thus, the cost of production benefits increases, which leads to a decrease in total total profit. Well, in the fifth paragraph, we note the so-called forecasts of the manufacturers themselves or their expectations. Sometimes entrepreneurs assume that prices for the goods they produce will rise, so they produce everything in small volumes. Naturally, the behavior of exchange fluctuations and other economic and financial indices is unpredictable, which is why many miss. But in this matter, as they say, each has its own policy.