What is Supply?
Chapter 21 Section 1
Exploring Supply and Demand
Law of Supply
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.
Explain the motive driving businesses to raise prices of products.
Section 2: Factors affecting Supply
Changes in the Cost of Resources
- 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.