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    IGCSE Economics Revision Notes On Supply

    Uploaded by

    Theodore Kim

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    IGCSE Economics Revision Notes On Supply

    Uploaded by

    Theodore Kim
    7 views3 pages

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    IGCSE Economics Revision Notes on Supply

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    Copyright:

    © All Rights Reserved
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    Download as pdf or txt
    7 views3 pages

    IGCSE Economics Revision Notes On Supply

    Uploaded by

    Theodore Kim

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Supply

    Definition of supply
    Willingness and ability to sell a product at a given price level.
    It includes goods coming from storage as well as those coming directly from production lines.

    Relationship between supply and price


    Supply and price are directly related.
    - As price rises, the quantity supplied also rises, because at higher prices, firms make
    more profit and can cover higher costs of production.
    - As price falls, the quantity supplied also falls, because at lower prices, firms make less
    profit and are less able to cover their costs of production.

    So, as price rises, the willingness and ability to sell a product increases.

    Individual vs market supply


    Individual supply is the amount of a product an individual firm would be willing and able to
    supply at different prices. Market supply is the total supply of a product at different prices, found
    by adding up each individual’s supply at different prices.

    Supply curves

    Shift of the curve (to the right or left): increase or decrease in supply

    Increase in supply / shift of the supply curve Decrease in supply / shift of the supply
    to the right curve to the left
    Movement along the curve (to the right or left): extension or contraction of supply

    Extension of supply / leftward movement Contraction of supply / rightward movement


    along the supply curve along the supply curve

    Changes in supply vs Changes in quantity supplied

    Changes in supply causes the supply curve to shift - an increase in supply causes the supply
    curve to shift to the right and a decrease in supply causes the supply curve to shift to the left.

    Changes in quantity supplied causes a movement along the supply curve - an increase in
    quantity supplied causes supply to extend and a decrease in quantity supplied causes supply to
    contract.

    Causes of changes in supply

    Change in the costs of production - If it costs more to produce a product, suppliers will want a
    higher price for it. If it costs less to produce a product, suppliers are more willing to agree on a
    lower price. The two reasons for a change in costs of production are a change in the price of
    any of the factors of production (labour, capital, land) and a change in productivity.

    Taxes - A rise in the rate of an existing tax or the imposition of new tax will make it more
    expensive to supply a product and will reduce supply. In contrast a cut in tax or its removal will
    increase supply.

    Subsidies - The granting of a subsidy (a financial incentive to producers) will cause an increase
    in supply.

    Improvement in technology - This raises the productivity of capital, reduces costs of


    production and results in an increase in supply.
    Weather conditions and health of livestock and crops - This affects agricultural products. A
    period of good weather is likely to increase the supply of crops and vice versa for a period of
    bad weather.

    Prices of other products - Firms often produce a range of products. If one product becomes
    more popular, its price rises and supply extends. At the same time, firms can decide to produce
    less of other, less profitable products.

    Discoveries and depletions of commodities - For example, the discovery of new oil fields will
    increase the supply of oil.

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