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June 23, 2018 

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REVENUE EFFECT: The goal of imposing taxes to generate revenue used to finance the operation of government, most notably to finance the provision of public goods. This is one of two reasons, and the primary reason, that governments impose taxes. The other reason is the allocation effect. Governments work the revenue effect because they need access to income and resources to build highways, defend the nation, educate the population, and maintain the legal system. They purchase these resources with tax revenue generated through the revenue effect.

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QUANTITY SUPPLIED:

The specific quantity of a good that sellers are willing and able to sell at a specific supply price. The key word is "specific." Quantity supplied and supply price form matched pairs--one quantity, one price. The combination of all price-quantity pairs is then what constitutes supply. The supply curve is a plot of the quantity supplied at each supply price.
Quantity supplied is the maximum quantity that sellers will offer for sale at a given price. The primary influence on quantity supplied is the supply price. The quantity supplied is generally greater if the supply price is higher and less if the supply price is lower.

Constrained by Cost

Sellers bump into a maximum quantity supplied for a given supply price due to the opportunity cost of production. Because the cost of production generally rises with the quantity produced, sellers need a higher price as the quantity supplied increases. Sellers offer a quantity for sale if the price received is sufficient to cover the cost of production. Should they try to produce too much, beyond the maximum quantity supplied, cost rises and exceeds revenue.

Consider the hot fudge sundae selling activities of the Hot Momma Fudge Bananarama Ice Cream Shoppe. Hot Momma Fudge is willing and able to produce 50 Hot Momma Fudge Bananarama Ice Cream Sundaes at a $3 supply price. This price allows Hot Momma Fudge to cover the cost of ice cream, hot fudge, bananas, workers, plastic dishes, electricity, and the other production inputs. However, should Hot Momma Fudge try to produce 51, the opportunity cost exceeds this $3 price.

On the Supply Curve

As the maximum quantity that sellers are willing and able to sell, the quantity supplied lies ON the supply curve. In essence, the supply curve plots the range of quantities supplied for a range of supply prices.

Consider the supply curve for electronic calculators displayed in the exhibit to the right. For a supply price of $15, the quantity supplied is 200 calculators. Would calculator sellers be willing to sell fewer than 200 calculators at this price? Certainly. In so doing, their production cost is lower and profit is higher. Would calculator sellers be willing to sell more than 200 calculators at this price? Certainly not.

The story is the same for any quantity. Only the numbers differ. For a supply price of $45, the quantity supplied is 800 calculators. Sellers are willing to sell fewer than 800 calculators at this price, but not more.

Quantity Supplied, Not Supply

While the two terms are occasionally confused, quantity supplied is not the same as supply.
  • Quantity supplied is the specific quantity that sellers supply at a specific supply price. Quantity supplied is matched up with a specific price. Should the price change, then so too does the quantity supplied. Quantity supplied is a single number.

  • Supply, however, is the range of prices and quantities. It is all price-quantity pairs that make up the supply curve. Supply is a whole range of numbers.

<= QUANTITY DEMANDED


Recommended Citation:

QUANTITY SUPPLIED, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: June 23, 2018].


Check Out These Related Terms...

     | supply price | law of supply | supply schedule | supply curve | supply space | producer surplus | supply determinants | change in supply | change in quantity supplied | quantity demanded |


Or For A Little Background...

     | supply | market | quantity | opportunity cost | limited resources | economic analysis | exchange | scarcity | good | service |


And For Further Study...

     | market supply | price | competition | value | production | production possibilities | competitive market | efficiency | short-run production analysis | price elasticity of supply |


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