The words stock and supply of the commodity are frequently used interchangeably. However, the two concepts are different in economics.
What is Stock?
Stock describes the total amount of a specific commodity that is in hand with the company at any given time. It consists of the number of goods supplied by a firm for selling as well as the number of goods stored with the firm, and withdrawn or hoarded by it from the market to sell them in future. All of the stock produced by a firm is not offered in the market for sale, a part of the produced goods is stored in the storage/warehouses and is released only when the prices are favourable for the firm. Therefore, it is essential for the firms to maintain proper warehousing facilities to keep the stock in proper condition.
What is Supply?
Supply refers to the quantities of a commodity that a producer is willing to provide for sale over a specific time period at the prevailing market prices. Supply of a commodity is not the total stock of that commodity, it is just a portion of the total stock of the commodity that is offered to the public in the market for selling and distribution. The four factors that affect the supply are quantity of commodity, price of the commodity, period, and willingness to sell. As the supply of a commodity is affected by its price, it is essential for the firms to keep the price at a level which will allow them to maximise their sales potential and generate optimal revenue.
Difference between Stock and Supply
| Basis | Stock | Supply |
|---|---|---|
| Meaning | It is the total amount of a specific commodity that is in hand with the company at any given time. | It is the portion of the quantities of a commodity that a producer is willing to provide for sale over a specific time period at the prevailing market prices. |
| Flow Concept | As stock is related to a specific point of time, it is not a flow concept. | As supply is related to a time period, it is a flow concept. |
| Relation with Price | Stock indicates the fixed quantity of a commodity; therefore, it is not related to the price of the commodity. | Supply of a commodity change with the change in price; therefore, it is always related to the price of the commodity. |
| Depends on | Stock depends on the production of the commodity. | Supply of a commodity depends on its price. |
| Measurement | Stock is measured at a specific point of time. | Supply is measured over a specific time period. |
| Interdependence | Stock does not depend on the supply of a commodity and it can never be less than supply. | Supply of a commodity depends on the stock and is always less than stock. |
| Example | If a vendor has 50 tonnes of rice in his godown and is willing to sell 30 tonnes of it for ₹50 per kilogram, the stock is 50 tonnes. | If a vendor has 50 tonnes of rice in his godown and is willing to sell 30 tonnes of it for ₹50 per kilogram, the supply is 30 tonnes. |
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