A supply analysis is a series of input and output equations in which input refers to the demand for a product and output refers to supply. In general, a high demand raises the supply and price of a product, while a low demand reduces its supply and price. Analyzing this relationship helps suppliers make decisions. It also illustrates the impact of their decisions on the market. Although supply analysis is primarily an economic term, it is regularly used by lawyers to regulate such issues as personal and corporate finance, medical treatment, public policy and international affairs.
When dealing with a legal case involving the distribution of a good, lawyers typically research the relevant market and the laws that govern the given market. For instance, certain products may be government approved and therefore may be sold only under specific circumstances. In other cases, such as the movement of illegal materials, lawyers may need to research the laws surrounding the material. Similarly, politicians may need to address the reasons behind the demand for the materials.
Supply analysis is useful to policy decisions because it illustrates the effects of different policies on producers selling a service or good. Supply analysis may be applied in a range of situations; in the case of policy packages, producers may be any member of the civil sector, including private corporations and home owners. By using supply analysis to understand the effects of a policy on market prices, consumer behavior, employment, wages, and government activity, lawyers and politicians can make more informed decisions. On a smaller scale, supply analysis can help employers manage their private enterprises.
One example of the legal use of supply analysis is water management. In the early 2000s, lawyers in the US state of California investigated the state water supply, the public demand for water, and the impact of corporations and environmental groups on water management. The result was new state legislation addressing the need for better water management. Another example is the ability of international law to regulate the movement of immigrants and refugees according to the supply of resources in various countries. Similarly, the ability of one community to receive aid resources from another often is dictated by supply availability and legal obligation.
Economics makes great use of supply analysis as well. While many understand the law of supply and demand, maintaining stability within this equation requires the proper management of labor, equipment, and natural and financial resources. By using a supply analysis to understand the relationship between a firm, the market, and the laws governing the market, firms and their legal advisors are better able to make constructive decisions.