Supply
Supply refers to the quantity of a good or service that producers are willing and able to offer for sale at various price levels. The Law of Supply states that, ceteris paribus, as price rises, quantity supplied rises — reflecting a positive relationship between price and quantity supplied. This is shown by an upward-sloping supply curve. Producers are incentivised by higher prices to increase output as profitability rises.
Key Terms & Definitions
Supply
The quantity of a good or service that producers are willing and able to sell at a given price over a given time period.
Law of Supply
Ceteris paribus, as the price of a good rises, the quantity supplied rises, and vice versa.
Non-price Determinants of Supply
Factors that shift the supply curve: costs of production, technology, number of sellers, government policy, prices of related goods, expectations.
Subsidy
A payment from the government to producers to lower their costs of production, shifting supply rightward.
Indirect Tax
A tax on goods/services that raises production costs, shifting supply leftward.
Joint Supply
When producing one good automatically produces another (e.g., beef and leather).