supply

• define supply


  the ability and the willingness to provide a good or service at a particular price at a given moment in time
• the supply curve is upward sloping- a higher price enables firms to make more profit on the increased output, lower price means less produced so less profit and could make a loss
• to increase production, you need to use up more resources which will cost more money. you would only do this if you are going to receive more money
• factors which effect supply

  • price of the good
  • price of other goods
  • production costs
  • tax and subsidies
  • government legislation
  • expectations
  • goal of the supplier
  • weather
• price of other goods

  the price change of one good affects the amount supplied of another good, if those goods are in joint supply or competitive supply
• define joint supply


  production of one good, automatically causes the production of another good
• define competitive supply


  production of one good, automatically prevents the supply of another
• example of joint supply


  production of beef produces leather

  if the beef price increases- farmers would want to take advantage, so would slaughter their cattle. this increases the supply of leather (shifting to the right on the supply curve, from s to s2)
• example of competitive supply


  a rise in beef price, may cause a decrease in milk supply, as the cattle used for beef can no longer be milked

  this would shift the milk supply curve to the left (from s to s1)
• competitive and joint supply- how they effect the supply curve

  
• price of the good

  
• cost of production

  
• price of other goods

  
• changes in technology

  goals of the seller

  expectations

  weather

  government legislation, tax/subsidies

  
• cost of production increases

  • (wages, raw materials, power etc) increase but selling price remains the same, the business will make less money on output.
  • the only way to produce the same amount of money, would be to increase prices.
  • supply curve will shift to the left (s to s1), as less will be supplied at each and every price
• cost of production decreases

  • supply curve will increase and shift to the right (s to s2)
  • firm will produce more at each and every price, as they are making more money when they provide the good
• changes in technology (improvement)

  • quicker and cheaper production
  • increase in supply
  • supply curve will shift to the right (s to s2)
• changes in technology (becomes outdated)

  • slower production, equipment may break down etc
  • decrease in supply
  • supply curve will shift to the left (s to s1)
• goals of the seller (growth/ become noticed)

  on some occasions the goal of the seller is to grow their company.

  • will increase sales, to increase marketshare
  • therefore increasing supply
  • supply curve shifts to right (s to s2)
• goals of the seller (exclusivity)


  on other occasions the goal of the seller is to be exclusive

  • will want decreased sales, to gain a reputation (less in circulation makes it more valuable)
  • therefore decreasing supply
  • supply curve shifts to left (s to s1)

  e.g designer brands want to seem exclusive
• expectations

  • respond same as demand
  • forecasted hot summers, may encourage producers to increase supply of suncream
  • shift supply to the right, s to s2
  • expected football team to loose, decrease in supply
  • shift left, s to s1
• weather

  • certain products- weather is a significant factor affecting supply
  • drought or flood- destroy crops, therefore decreasing supply
  • supply shift to left, s to s1
  • perfect growing conditions
  • shift supply to right, s to s2
• government legislation

  tax/subsidies


  • taxes imposed on businesses/products- is an increase in production costs
  • shifts supply to the left, s to s1

  
  

  • subsidies- money paid to the business to encourage them to produce more (incentive)
  • shifts supply to the right, s to s2
• supply curve for lamb if:

  • there is an outbreak of hand foot and mouth for lamb
  • and increase in the production cost of lamb

  
  

  • massive increase in price offered for wool (encourages farmers to keep lamb alive, to provide wool now and into the future. this means there is a decrease in supply of lamb to be eaten)

  shifts left, s to s1

  
• supply curve for lamb when:

  • the price of lamb increases

  when only the price of the product changes, it must be an extension or contraction.

  as price increases here, it means there would be an extension in supply for lamb, as more can be produced