The Supply Curve

Question 1

What is supply?

Answer 1

Quantity supplied is the amount of a good that sellers are willing and able to sell

Question 2

What is the law of supply?

Answer 2

The law of supply states that, other things being equal, the quantity supplied of a good rises when the price of a good increases

Question 3

What is the difference between market and individual supply?

Answer 3

Market supply refers to the sum of all individual supplies for all sellers of a particular good or service

Graphically, individual supply curves are summed horizontally to obtain the market supply curve

Question 4

What will cause a movement along the supply curve?

Answer 4

A change in price

Question 5

What factors influence supply? (ie, can cause a shift in the supply curve)

Answer 5

Number of Sellers

The more sellers in a market, the greater the amount supplied

Input Prices

The higher the prices of inputs, the fewer the amount supplied

This is due to the fact that it costs more to produce a good, and producers will seek to maintain their profit margins

Technology

If we have a technological advancement, a greater amount will be supplied

This is because superior technology can produce goods at a lower price, allowing producers to sell more while maintaining profit margins

Expectations

If producers believe that the price of a good will increase in the future, they may reduce supply now in order to profit later