Definition: Supply schedule is a chart that shows how much product a supplier will have to produce to meet consumer demand at a specified price based on the supply curve. In other words, it’s basically a supply graph in spreadsheet form listing the quantity that needs to be produced at each product price level.
What Does Supply Schedule Mean?
What is the definition of supply schedule? This concept is particularly important for businesses because they have to understand what happens to their inventory and units sold as the sales price changes. For example, the supply curve shows us that an increase in the selling price of a good will increase the business’ willingness to produce the good.
Thus, management can look at the schedule and plan what price they will market the product in the market and how many units they will need to produce at that price point.
This sound simply, but it’s fair from that. The quantity supplied can be affected by a number of factors including political conditions of the country where the supplier operates, production costs, climatic conditions affecting the supply of product, prices of substitute and complementary products.
Let’s take a look at an example.
Example
Joe grew tomatoes on his farm and sold 50 of them in one lot for $10 each. For each lot he incurred costs of around $8, making a $2 profit on each lot. He later learned from another farmer, Zac, that growing potatoes and selling them was more profitable due to increase in its demand in the market.
Zac told Joe that he could earn $20 for selling a lot of 100 potatoes with a profit of around $10 for each lot. This appeared significantly profitable to Joe as he could earn $8 more in profit on this new product. Joe started growing potatoes on his farm, which had the capacity of growing maximum of 100 potatoes. He thinks the demand for his potatoes will increase and consumers will be willing to pay $25 per lot of potatoes. Looking at his supply schedule, Joe is willing to produce 125 potatoes at this price, but he is limited by his farm.
Currently, no matter how much he can charge for his potatoes, he can only produce 100 potatoes. Therefore, he is required to invest more capital to purchase another piece of land to expand his production and take advantage of this growing market.
Summary Definition
Define Supply Schedule: Supply schedule means a table that represents the sales price and quantity supplied as depicted in the economic supply curve for that product or market.
