3.2 Supply LO 3, 4
The amount of a good that producers wish to sell is called quantity
supplied. It is a flow expressed as so much per period of time. It
depends on the product’s own price, the costs of inputs, the number
of suppliers, government taxes or subsidies, the state of technology,
the weather, and prices of other products.
The relationship between quantity supplied and price is represented
graphically by a supply curve that shows how much will be supplied
at each market price. Quantity supplied is assumed to increase as the
price of the product increases, other things held constant. Thus,
supply curves are positively sloped.
A shift in the supply curve indicates a change in the quantity supplied
at each price and is referred to as a change in supply.
An increase in supply means the supply curve shifts to the right; a
decrease in supply means the supply curve shifts to the left.
It is important to make the distinction between a movement along a
supply curve (caused by a change in the product’s price) and a shift of
a supply curve (caused by a change in any of the other determinants
of supply).