Supply
AQA also says:
Spec content: The factors which determine the supply of a good or service; Causes of changes in supply; The supply curve.
Students should be able to understand: what is meant by the supply of a good or service; the factors which influence supply; how to construct an individual firm's supply curve from production data; the difference between shifts of, and movements along, the supply curve.
What is Supply?
Supply is the quantity of a good or service that producers are willing and able to offer for sale at each possible price over a given time period. The key relationship is the law of supply: as price rises, the quantity supplied rises; as price falls, quantity supplied falls. This positive relationship exists because higher prices make production more profitable, incentivising existing producers to expand output and new producers to enter the market.
The Supply Curve
The supply curve plots price (y-axis) against quantity supplied (x-axis). It slopes upward from left to right, reflecting the positive price–supply relationship.
Movement Along vs Shift of the Supply Curve
- A movement along the supply curve: caused only by a change in the good's own price. Quantity supplied changes; the curve stays fixed.
- A shift of the supply curve: caused by any other factor. The whole curve moves. A right shift means more is supplied at every price (increase in supply); a left shift means less is supplied at every price (decrease in supply).
Factors that Shift the Supply Curve
| Factor | Effect | Example |
|---|---|---|
| Costs of production | Higher costs → supply decreases (left shift) | Rising wages increase costs; firms supply less at every price |
| Technology | Better technology → supply increases (right shift) | Automation reduces production costs; more supplied at every price |
| Number of producers | More firms → supply increases | New competitors enter the smartphone market |
| Government intervention | Taxes increase costs (left shift); subsidies reduce costs (right shift) | A sugar tax reduces supply of sugary drinks |
| Natural events / weather | Adverse conditions reduce supply | Drought reduces wheat harvest; supply curve shifts left |
| Price of other goods | If another good becomes more profitable, firms switch production | Rising wheat prices lead farmers to supply less barley |
Key Takeaways
- Supply: quantity producers are willing and able to sell at each price. The supply curve slopes upward.
- Movement along: only when own price changes.
- Shift of the curve: costs, technology, number of firms, government policy, natural events, or prices of other goods.
- Right shift = increase in supply (more supplied at every price); left shift = decrease.