Supply
Supply
- Supply = how much firms are willing and able to sell at each price.
- Law of supply: price up → quantity supplied up (a direct relationship) — firms earn more.
- So the supply curve slopes upward.
Practice
The supply curve slopes upward because, as price rises:
Higher prices raise potential profit, so firms supply more — a direct relationship.
Conditions of supply
- Own price = a movement along. Other conditions shift the curve:
- costs of production (up → supply down),
- technology (better → supply up),
- a tax (supply down) or subsidy (supply up),
- weather (farm goods), number of firms.
Practice
A government subsidy to producers shifts the supply curve:
A subsidy lowers costs, increasing supply (shift right); a tax does the opposite.
Practice
A rise in production costs shifts the supply curve to the left.
Higher 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