AP_Krugman_Textbook

this relationship as the law of supply.Generally, the price and quantity supplied are

positively related. So just as demand curves normally slope downward, supply curves

normally slope upward: the higher the price being offered, the more of any good or

service producers are willing to sell.

Shifts of the Supply Curve

Compared to earlier trends, coffee beans were unusually cheap in the early years of the

twenty-first century. One reason was the emergence of new coffee bean–producing

countries, which began competing with the traditional sources in Latin America. Viet-

nam, in particular, emerged as a big new source of coffee beans. Figure 6.2 illustrates

this event in terms of the supply schedule and the supply curve for coffee beans.

The table in Figure 6.2 shows two supply schedules. The schedule before new pro-

ducers such as Vietnam arrived on the scene is the same one as in Figure 6.1. The sec-

ond schedule shows the supply of coffee beans after the entry of new producers. Just as

a change in the demand schedule leads to a shift of the demand curve, a change in the

supply schedule leads to a shift of the supply curve—a change in supply.This is

shown in Figure 6.2 by the shift of the supply curve before the entry of the new pro-

ducers,S 1 , to its new position after the entry of the new producers, S 2. Notice that S 2

lies to the right of S 1 , a reflection of the fact that the quantity supplied increases at

any given price.

As in the analysis of demand, it’s crucial to draw a distinction between such

changes in supply and movements along the supply curve—changes in the quan-

tity supplied that result from a change in price. We can see this difference in

60 section 2 Supply and Demand

11.6

11.5

11.2

10.7

10.0

9.1

8.0

70 9 11 1513 17

Quantity of coffee beans

(billions of pounds)

$2.00

1.75

1.50

1.25

1.00

0.75

0.50

Price of

coffee beans

(per pound)

Price of

coffee beans

(per pound)

Quantity of

coffee beans

supplied

Supply (billions of pounds)

curve, S

$2.00

Supply Schedule for Coffee Beans

As price rises,

the quantity

supplied rises.

1.75

1.50

1.25

1.00

0.75

0.50

figure 6.1 The Supply Schedule and the Supply Curve

The supply schedule for coffee beans is plotted to yield

the corresponding supply curve, which shows how much

of a good producers are willing to sell at any given price.

The supply curve and the supply schedule reflect the fact

that supply curves are usually upward sloping: the quan-

tity supplied rises when the price rises.

Thelaw of supplysays that, other things
being equal, the price and quantity supplied
of a good are positively related.

Achange in supplyis a shift of the supply
curve, which changes the quantity supplied at
any given price.

Amovement along the supply curveis a
change in the quantity supplied of a good that
is the result of a change in that good’s price.