SUPPLY INFLUENCES
Many factors will influence the suuply of a product. We usually look at each influence in isolation of others, ie ceteris parabus: all other things held constant
Supply curve: shows the amount that producers would like to supply at various prices
Law of Supply: a positive relationship exists between price and
quantity supplied
eg as prices rise, producers will be prepared to supply more
This can be shown on a supply curve:
An increase in price will lead to a movement up the supply curve, and is called an extension of supply, or an increase in quantity supplied
A price decrease will lead to a contraction of supply, or a decrease in
quantity supplied.
Any non price influence will cause the supply curve to shift.
An outward shift is called an increase in supply, whilst a decrease in supply is shown by an inward movement of the supply curve.
Non price influences include:
Costs of production
The profitability of alternative products
Random shocks
Government legislation