Supply + Supply Curve

• Supply in economics is the quantity of a good or service that producers are willing and able to produce at a given price in a given time period.
• The law of supply states that there is a direct relationship between price and quantity supplied, meaning as the price increases quantity supplied increases too, and as the price decreases quantity supplied decreases too.
• The supply curve is drawn upward sloping because it indicates this direct relationship, as price goes up quantity supplied goes up.
• Price increases and price decreases on the supply curve indicate the law of supply, for example, an increase in price from p1 to p2 indicates an extension of supply, and a decrease in price from p1 to p3 indicates a contraction of supply.
• Suppliers want a higher price to cover their cost of production and maintain their profit margins.
• Another non-price factor that can affect supply is indirect tax, which is a tax on production that firms have to pay.
• An increase in indirect tax will shift the supply curve to the left.
• Non-price factors that can affect supply include productivity of labor, which is the output per worker per time period.
• An increase in productivity of labor will shift the supply curve to the right, while a decrease in productivity of labor will shift the supply curve left.
• A reduction in cost of production will shift the supply curve to the right, while an increase in cost of production will shift the supply curve left.
• The supply curve is upward sloping due to the profit motive.
• Non-price factors that can affect supply include changes in costs of production, which influence the willingness and ability to supply.
• The law of supply is illustrated on a diagram by moving along the supply curve, for example, if the price of a good or service goes up, we move up the supply curve, and if the price of a good or service decreases, we move down the supply curve.
• The key question in understanding the law of supply is why there is a direct relationship between price and quantity supply, why do producers supply more when the price goes up, and why is their willingness and ability greater to supply when the price is higher.
• The answer to this question is profit, producers have a profit motive, and they are incentivized to produce more and sell more when prices go up.
• A subsidy is a money grant given by governments to producers to lower costs of production and to encourage an increase in output.
• If any of these factors decrease in price and cost, the supply curve is going to shift to the right from S1 to S2.
• Achieved C stands for cost of production as a cheat.
• If a subsidy has been taken away or decreased in size, costs of production for a firm are going to increase and the supply curve is going to shift to the left from S1 to S3.
• If indirect taxes have been reduced or taken away, cost of production will decrease and therefore the supply curve will shift to the right from S1 to S2.
• If technology gets worse or becomes outdated, the supply curve is going to shift to the left from S1 to S3.
• The more firms that enter the market, the more firms there are in the market, and the supply curve will shift to the right from S1 to S2.
• If the subsidy has been given or increased in size, the supply curve is going to shift to the right because costs of production have been lowered.
• Bad weather, whatever that weather might be, will shift the supply curve to the left from S1 to S3.
• If the indirect tax has been implemented or increased, the supply curve will shift to the left from S1 to S3.
• An improvement in technology reduces costs of production and shifts the supply curve to the right from S1 to S2.
• All the other factors that can affect costs of production, such as transport costs, labor costs, the price of oil, raw material prices, utilities, and government regulations, can shift the supply curve to the left from S1 to S3.
• Good weather allows supply to increase or shift supply to the right from S1 to S2.
• Technology massively increases the willingness and ability to supply or decreases the weakness and ability to supply by affecting costs of production.