What Counts as "Supply" II

I wrote yesterday's discussion of OSVs not for its own sake (it is not likely that I managed to warn off anyone who was genuinely considering an investment in this loser of an asset) -- but to make a point about supply.

The supply of X in general is not "the amount of X that is present on the face of the earth at a particular time." It is "the amount of X that will be brought to market and sold to a buyer at any given price along a range of possible prices."

This is what is expressed as the Supply line on a S-D graph.

You see a supply curve on the graph above. The quantity of such vessels (in terms of hours in use -- because the vessels are generally chartered by the oil companies working the rigs from the ship owners by the hour) that would be made available to a buyer (charterer) is the X axis. The price AT WHICH that quantity would be supplied is the Y axis. The line curves upward to the right -- that is, the higher the price/charter rate oil companies are willing to offer, the more such vessels will be brought into use.

Of course to make this a full S-D graph, we'd need the demand curve moving downward to the right. Then we'd see that there is in principle ONE right price and ONE right quantity given certain framing circumstances, because there is a unique point of intersection.

A lot more could be said about these graphs. But my point here is that in some situations they seem to presume knowledge of the unknowable. Specifically, if I don't know how any of the OSVs now in "cold" stack are still seaworthy and could plausibly be brought out and put back to use at minimal expense, then I don't know very much about what the shape of the S curve should be.

That example is one of an enormous class.

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