1.2.2 Supply

Supply

🔗 The amount of a product a business is willing and able to supply at a given price

• If a business can command a higher price = a higher quantity is supplied
• If a business can't command a higher price = a lower quantity is supplied

Factors leading to a change in supply

• Changes in the costs of production

📌 As the costs to produce a good rise, businesses will supply less of it. This is because it becomes less profitable for the business to produce it at that price.

• Introduction of new technology 📌 New technology increases supply. This is because it allows businesses to be more efficient, meaning they can produce products at a lower cost.

• Indirect taxes 📌 As taxes rise, supply falls as the business has higher costs

• Government subsidies 📌 Subsidies increase the amount a business supplies as it lowers the business' costs of production and encourages them to increase output to access higher subsidies

• External shocks 📌 Supply of a good may fall as external shocks rise as it affects whether the business can produce their products

🔑 When the quantity supplied increases, the supply curve will shift to the right

🔑 When the quantity supplied decreases, the supply curve will shift to the left