Back to Basics Part 2: Supply

What is Supply?

• Supply is the willingness and ability of producers to produce a quantity of goods and services at a given price at a given time period. 
• The law of supply states that, as price increases, the quantity supplied of the product will increase, ceteris paribus. 
• An example could be the market of frozen pizzas. The following graph demonstrates the rule above.

• This happens because at higher prices there will be more potential profits to be made and so the producer will increase output. 

• Factors affecting supply other than price - 
• The costs of factors of production
• The state of technology
• Expectations
• The price of other products which the producer could produce instead of the existing product.
• Amount of Government intervention
• A change in any of these factors (other than price) will shift the supply curve, for example: