What is supply
Quantity that firms are willing and able to supply at a given price in a given period of time
Why are supply curves upward sloping
Profit motive - if market price increases following an increase in demand it becomes more profitable for firms to supply the good - so supply increases
New entrants coming to the market- higher prices may create and incentive for other businesses to enter a market leading to an increase in total supply
What is market supply
Sum of all individual supply in a market
Individual supply
Supply that a producer is willing and able to sell at a given period of time
Types of supply
Joint supply - when the production of one good automatically leads to the production of another
Composite supply - when a good can be used in the production of two or more different products
Competitive supply - when a good or factor of production can be used to produce two or more alternative products so allocating more resources to one reduces supply of the other
Derived - when a good is produced not for its own use but because it is needed to produce another good or service - steel for cars
Factors influencing supply
Price of good - movement
Cost of production
Technological progress
Price of related goods
Government policy
Expectations of future prices
Number of firms in the market
Natural factors
What is producer surplus
Difference between the price the producers is willing to charge and the price they actually charge
What affects producer surplus
Market price
Elasticity - more elastic a producers supply is the lower their producer surplus
