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Definition

An economics term which refers to the availability in the economy of a particular good or service. If a good or service is in short supply then the price tends to rise and vice versa. The demand for that good or service is the other side of the equation. The combination of supply and demand results in an equilibrium price. In general the factors of production and the goods which are produced are scarce and hence they command a price which is a function of the degree of scarcity and the extent to which they have substitutes. The elasticity of supply is determined by the availability of the product or service. A very steep supply curve indicates that it is inelastic and the price will rise or fall sharply for small changes in supply. The opposite is also true.

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