What is supply?
Supply is the willingness and ability of producers to offer a good or service for sale at different prices over a given time period.
What is the law of supply?
There is a positive relationship between price and quantity supplied:
Price ↑ → producers supply more.
Price ↓ → producers supply less.
Reason: Higher prices increase the incentive to produce because potential revenue and profits rise.
What is the difference between individual and market supply?
Individual supply: The quantity a single producer is willing to supply at different prices.
Market supply: The total supply in the market, found by horizontally summing all individual supply curves.
What is joint supply? Give an example.
When producing one good automatically produces another.
Example: Producing beef also produces leather (from cow hides).
If beef supply increases → leather supply also increases.
What is competitive supply? Give an example.
When the same resources can be used to produce different goods.
Example: A farmer using land for either wheat or barley.
Increasing supply of one means reducing supply of the other (opportunity cost).
What causes movements along the supply curve?
A change in the good’s own price:
Extension of supply: Price ↑ → more supplied (movement up the curve).
Contraction of supply: Price ↓ → less supplied (movement down the curve).
What causes shifts in the supply curve?
Shifts are caused by non-price factors
What causes an increase in supply (rightward shift):
Lower production costs.
Technological improvements.
Government subsidies.
Favourable weather.
Entry of new firms.
What causes a decrease in supply (leftward shift)?
Higher production costs.
New taxes.
Poor weather/natural disasters.
Withdrawal of subsidies.
Exit of firms.
Why is the supply curve usually drawn as upward sloping?
Because higher prices create an incentive for producers to supply more.
In reality: it may be curved (elasticity changes at different output levels).
In theory diagrams: often drawn as a straight line for simplicity.
