1.2.2 Supply

• Supply is the number of goods & services businesses are willing to sell at a given price at a specific time.
• Direct relationship between supply & price

  • As price increases, quantity supplied increases.
  • As price decreases, quantity supplied decreases.
  • At higher prices, businesses are incentivised to supply more of the product.
  • Hence the supply curve slopes upwards from left to right.
• Non-price factors affecting supply

  1. Change in cost of production -  Increase in cost of production= more expensive to produce each unit& business will be able to produce less at a given price.
  2. New technology - Lower cost of production as more can be produced at a time.
  3. Indirect Taxes - Causes an increase in cost of production as firms have to pay extra costs.
• Non-price factors affecting supply

  1. Government Subsidies - A subsidy from government will reduce cost of production.
  2. External Shocks - Unexpected events can change supply.