IGCSE Economics Notes

• Rrefers to the total amount of a good or service that producers are willing and able to offer for sale at different prices over a specific period of time. 

• Law of Supply: As the price of a good rises, the quantity supplied increases, and as the price falls, the quantity supplied decreases, assuming all other factors remain constant.

Movement Along the Supply Curve - When the price of a good changes, there is a movement along the supply curve.

• Extension of Supply - When the price increases, the quantity supplied increases, represented as a movement up along the supply curve.

• Contraction of Supply - When the price decreases, the quantity supplied decreases, represented as a movement down along the supply curve.

Diagram

• The supply curve typically slopes upward from left to right, reflecting the law of supply.

Individual Supply

• • • The quantity of a good that an individual producer is willing and able to supply at different prices.

Market Supply

• • • The total quantity of a good that all producers in the market are willing and able to supply at different prices.

Link Between Individual and Market Supply

• • • Market supply is the total of all individual supplies in the market.

    • To determine market supply, add up the quantities supplied by all individual producers at each price level.

Shift in Supply Curve

• Increase in Supply: When the supply curve shifts to the right, it indicates an increase in supply. This means that at each price level, a greater quantity is supplied.

• Decrease in Supply: When the supply curve shifts to the left, it indicates a decrease in supply. This means that at each price level, a smaller quantity is supplied.

Causes of Shifts

• Changes in Production Costs: A decrease in production costs (e.g., due to technological advancements or lower input prices) can shift the supply curve to the right.

• Changes in Technology: Improvements in technology can increase supply, shifting the supply curve to the right.

• Number of Suppliers: An increase in the number of suppliers can shift the supply curve to the right. Conversely, a decrease in the number of suppliers shifts it to the left.

• Expectations of Future Prices: If producers expect higher future prices, they might reduce current supply, shifting the supply curve to the left.

• Government Policies: Taxes, subsidies, and regulations can affect supply. For example, a subsidy might increase supply (shift right), while a tax might decrease supply (shift left).