Social problems
Market Supply
Supply is the quantity of a good or service that a producer is willing and able to supply onto the market at a given price in a given time period.
Normally as the market price of a commodity rises, producers will expand or increase their supply onto the market.
There are two main reasons why supply curves for most products slope upwards from left to right giving a positive relationship between the market price and quantity supplied:
1) When the market price rises, it becomes more profitable for businesses to increase their output. Higher prices send signals to firms that they can increase their profits. When output rises, a firm's costs may rise, therefore a higher price is needed to justify the extra output and cover these extra costs of production
2) Higher prices makes it more profitable for other firms to start producing that product so we may see new firms entering the market leading to an increase in supply available for consumers to buy. For these reasons we find that more is supplied at a higher price than at a lower price.
What causes a shift in supply curve?
i) Costs of production
A fall in the costs of production leads to an increase in the supply of a good because lower costs mean that a business can supply more at each price. So supply curve shifts right. For example a firm might benefit from a reduction in the cost of imported raw materials.
If production costs increase, a business will not be able to supply as much at the same price - this will cause an inward shift of the supply curve (that is, the supply curve shifts left). An example of this would be an inward shift of supply due to an increase in wage costs. ii) Changes in production technology
Technology can change very quickly and when it does change, we expect to see increases in supply. An example of an improvement in production technology is as follows: The invention of new machines that can produce more products in a given time, leading to an increase in
Supply is the quantity of a good or service that a producer is willing and able to supply onto the market at a given price in a given time period.
Normally as the market price of a commodity rises, producers will expand or increase their supply onto the market.
There are two main reasons why supply curves for most products slope upwards from left to right giving a positive relationship between the market price and quantity supplied:
1) When the market price rises, it becomes more profitable for businesses to increase their output. Higher prices send signals to firms that they can increase their profits. When output rises, a firm's costs may rise, therefore a higher price is needed to justify the extra output and cover these extra costs of production
2) Higher prices makes it more profitable for other firms to start producing that product so we may see new firms entering the market leading to an increase in supply available for consumers to buy. For these reasons we find that more is supplied at a higher price than at a lower price.
What causes a shift in supply curve?
i) Costs of production
A fall in the costs of production leads to an increase in the supply of a good because lower costs mean that a business can supply more at each price. So supply curve shifts right. For example a firm might benefit from a reduction in the cost of imported raw materials.
If production costs increase, a business will not be able to supply as much at the same price - this will cause an inward shift of the supply curve (that is, the supply curve shifts left). An example of this would be an inward shift of supply due to an increase in wage costs. ii) Changes in production technology
Technology can change very quickly and when it does change, we expect to see increases in supply. An example of an improvement in production technology is as follows: The invention of new machines that can produce more products in a given time, leading to an increase in