GCSE-readySupply
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Supply is about what producers are willing and able to sell. Costs, technology and taxes all affect it.
What supply is
Supply is the quantity of a good or service that producers are willing and able to sell at a given price over a period of time.
The supply curve slopes upwards: higher prices make supplying more profitable, so quantity supplied rises.
The supply curve slopes upwards: higher prices make supplying more profitable, so quantity supplied rises.
Movements and shifts
A change in the good's own price causes a movement along the supply curve (extension or contraction).
A change in any other factor shifts the curve: right for an increase in supply, left for a decrease.
A change in any other factor shifts the curve: right for an increase in supply, left for a decrease.
Factors that shift supply
Costs of production (higher wages or raw material prices shift it left).
Technology (better technology shifts it right).
Indirect taxes such as VAT (shift it left).
Subsidies (payments from the government to producers shift it right).
Natural factors such as disasters and weather (a drought shifts crop supply left).
Technology (better technology shifts it right).
Indirect taxes such as VAT (shift it left).
Subsidies (payments from the government to producers shift it right).
Natural factors such as disasters and weather (a drought shifts crop supply left).
The government gives a subsidy to solar panel makers. What happens to supply?
- A subsidy lowers producers' costs.
Answer: Supply increases (shifts right).
Supply is willingness and ability to sell. Own price change: movement along the curve. Costs, technology, indirect taxes, subsidies and natural factors shift it.
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