supply

• Supply


  The quantity of a particular good or service that a producer is willing and able to supply onto the market at a given price in a given time period
• Law of supply


  • As the price of a product rises, businesses will expand supply to the market
  • As price increases, quantity supplied will also increase
• Reasons for the supply curve sloping upwards

  • The profit motive
  • Production and costs
  • New entrants coming into the market
• A higher price


  Leads to an expansion of quantity supplied
• A lower price


  Leads to a contraction of quantity supplied
• Law of diminishing marginal return

  After some optimal level of capacity is reached, adding an additional factor of production will actually result in smaller increases in output
• Market supply


  The total supply brought to the market by producers at each price
• Causes of shifts in the supply curve

  • Changes in the unit cost of production
  • A rise in interest rates
  • An increase in energy, oil or raw material prices
  • A fall in the exchange rate
  • Advances in production technology
  • The entry of new producers into the market
  • Favourable weather conditions
  • Taxes and government regulations
  • Subsidies
• An inward shift of supply


  Producers cannot supply as much at each price level
• An outward shift of supply


  Producers can supply more at each price level
• Joint supply


  Where an increase or decrease in the supply of one good leads to an increase or decrease in supply of a by-product
• Examples of joint supply

  • An expansion in beef production will lead to a rising market supply of beef hides
  • A contraction in market supply of lamb will reduce the supply of wool
  • Wheat and straw
  • Cotton and cotton seeds