Expectations of the Supplier

Definition

Expectations of the Supplier refer to the anticipated future conditions that a supplier considers when making production decisions, such as changes in input prices or demand for their product.

Analogy

Imagine you are a baker who expects the price of flour to increase next month. To prepare for this, you decide to buy extra flour now at the current lower price so that you can continue selling your baked goods at a competitive price in the future.

Related terms

Production Costs: The expenses incurred by a firm in order to produce goods or services.

Supply Curve: A graphical representation showing the relationship between the quantity supplied and its corresponding price.

Profit Maximization: The goal of a firm to maximize its earnings by producing at an output level where marginal revenue equals marginal cost.