Supply
Supply
- Supply = the quantity producers are willing and able to sell at each price.
- The law of supply: price up → quantity supplied up (more profit → make more).
- So the supply curve slopes upward.
Practice
The supply curve slopes upward because, as price rises:
Higher prices raise potential profit, so the quantity supplied rises.
Shifts of supply
- Own price = a movement along. Other causes shift the curve:
- costs of production (dearer wages/materials → supply falls),
- technology (better machines → supply rises),
- a subsidy raises supply; an indirect tax lowers it,
- the number of firms; weather (farm goods).
Practice
A government subsidy to producers will:
A subsidy lowers producers' costs, increasing supply (shift right); a tax does the opposite.
Practice
A rise in raw-material costs shifts the supply curve to the left.
Higher production costs reduce supply at every price, shifting the curve left.
You've got it
Key idea
- supply = willing and able to sell; the law of supply → upward curve
- own price = movement along; costs/technology/tax/subsidy = shift
- a subsidy shifts supply right; a tax or higher costs shift it left