What is Supply?

Chapter 21 Section 1

Exploring Supply and Demand

Supply refers to the various quantities of a good or service that producers are willing to sell at all possible market prices.

Law of Supply

As prices of goods rise the quantity rises, as the price falls the quantity falls. Law of supply is the principle that suppliers will normally offer more for sale at higher prices and less at lower prices.
Law of Supply

Supply Curve

graph that shows the amount of a product that would be supplied at all possible prices in the market.

Unlike the demand curve, the supply curve slopes upward. This reflects the fact that suppliers are generally willing to offer more goods and services at a higher price and fewer at a lower price.

Page 464

Go to page 464 in your book and read on Profit Motive.

Explain the motive driving businesses to raise prices of products.

Section 2: Factors affecting Supply

Changes in the Cost of Resources

When resource prices rise, sellers are less able to produce and sell the same quantities of a good. The supply curve shifts to the left, because it is more expensive to produce the good.


The degree to which resources are being used efficiently to produce goods and services.


  • New technology can speed up ways of doing things.
  • Technology can often cut a business' s costs. This pushes the supply curve to the right.

Changes in Government policies

  • When the government establishes new regulations, the cost of production can be affected, causing a change in supply.
  • Increased or tighter government regulations restrict supply, causing the supply curve to shift left.
  • Relaxed regulations allow producers to lower the cost of production, which results in a shift of the supply curve to the right.

Changes in Taxes and Subsidies

  • Higher taxes mean higher costs, pushing the supply curve to the left.
  • Lower taxes mean lower costs, pushing the supply curve to the right.
  • A subsidy is a government payment to an individual, business, or other group for certain actions.
  • Expectations of producers affect supply as well.

Elasticity of Supply

  • measure of how quantity supplied of a good or service changes in response to changes in price.