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2.2 β€” Supply

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Supply refers to the quantity of a good or service that producers are willing and able to sell at various prices. For detailed notes, refer to AP Macroeconomics Supply. A quick summary:

  1. Law of Supply:
    • There is a direct relationship between price and quantity supplied.
    • As prices increase, producers are incentivized to produce more.
  2. Determinants of Supply:
    • 6 Shifters of Supply:
      1. Prices/Availability of Inputs (Resources).
      2. Number of Sellers.
      3. Technology Improvements.
      4. Government Actions (Taxes/Subsidies).
      5. Opportunity Cost of Alternative Production.
      6. Expectations of Future Profit.
  3. Graphing Supply:
    • The supply curve is upward-sloping, showing the positive relationship between price and quantity supplied.
  4. Movement vs. Shift:
    • Movement Along the Curve: Caused by price changes of the good itself.
    • Shift of the Curve: Caused by changes in determinants of supply.

Graph View