To imagine an international market is simply unrealistic 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 the function of the proposal is 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 clear example.
General term
A proposal is considered the ability and readiness of the 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 have 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 the manufactured products. It is easy to draw in the form of a graph (see figures), it is often presented in textbooks on economics with intricate Latin terms and notations. 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 define 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 good. In simple 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.
