In contrast to demand, supply refers to the quantity of a good or service that producers are willing and able to sell at various prices.
- Law of Supply
- There is a direct relationship between price and quantity supplied.
- As price increases, quantity supplied increases; as price decreases, quantity supplied decreases.
- Determinants of Supply
Factors that shift the supply curve:- Input Prices: Higher costs reduce supply.
- Technology: Better technology increases supply.
- Number of Sellers: More sellers increase supply.
- Government Action: Taxes reduce supply, subsidies increase it.
- Expectations: Future price changes affect current supply.
- Movement vs. Shift
- Movement along the curve: Caused by a change in the price of the good.
- Shift of the curve: Caused by a change in any determinant of supply.
The supply curve is upward-sloping, showing the positive relationship between price and quantity supplied.
