Supply
Supply: the total amount of goods and services that producers are willing and able to purchase at a given
The law of supply: as the price of a product rises, the quantity supplied of the product will usually increase, ceteris paribus.
The market supply gives the total quantity supplied by all individual producers.
The supply curve represents the relationship between the price and the quantity supplied of a product, ceteris paribus.
The change in the price of a good causes a movement along the supply curve. For instance, as price increases from P to P1 the supply moves up the supply curve, which increases the quantity supplies from Q to Q1.
Non-price determinants of supply
Factors of production: changes in costs of factors of production, including land, labour, capital and entrepreneurship
(human capital or intellectual capital).
If these costs increase, then supply shifts to the left.
If the government suddenly increased the minimum wage then this could greatly increase the costs of labour to a shoe making factory, this would cause a shift in supply to the left.
Subsidy: effectively reduces the firm’s costs of production, so supply shifts outwards.
A change in the non-price determinants shift the supply curve because the quantity supplied at the price has changed
Indirect tax: effectively increases the firm’s variable costs, so supply shifts inwards.
Expectations: If demand for a product is likely to rise, for example due to a successful advertisement campaign or celebrity endorsements, supply increases.
Price of relating product: if producer could produce another product with higher profitability, due to limited resources, the quantity supplied of the original product would decrease.
Number of firms in the market: more firms producing shifts supply to the right as more is being supplied at each price
Transportation and infrastructure: if these improve then supply shifts outwards because the firm’s average costs are lowered.
State of technology: If technology improves then supply shifts to the left. As the firm can become more efficient with the same amount of costs so increase output.
So just remember PERSISTT for this (production, expectations, related, size, infrastructure, subsidy, tax and technology)