Supply (Edexcel IGCSE Economics)
Revision Note
Written by: Steve Vorster
Reviewed by: Jenna Quinn
Introduction to Supply
Supply is the amount of a good/service that a producer is willing and able to supply at a given price in a given time period
A supply curve is a graphical representation of the price and quantity supplied by producers
If the data were plotted, it would be an actual curve. Economists, however, use straight lines so as to make analysis easier
The supply curve is sloping upward as there is a positive relationship between the price and quantity supplied (QS)
Rational profit maximising producers would want to supply more as prices increase in order to maximise their profits
The law of supply states that there is a positive (direct) relationship between quantity supplied and price, ceteris paribus
When the price rises, the QS rises
When the price falls, the QS falls
Movement Along a Supply Curve
If price is the only factor that changes (ceteris paribus), there will be a change in the quantity supplied (QS)
This change is shown by a movement along the supply curve
Diagram: Movement Along a Supply Curve
There is an extension in QS as prices increase and a contraction in QS as prices decrease
Diagram analysis
An increase in price from £7 to £9 leads to a movement up the supply curve from point A to B
Due to the increase in price, the quantity supplied has increased from 10 to 14 units
This movement is called an extension in QS
A decrease in price from £7 to £4 leads to a movement down the supply curve from point A to C
Due to the decrease in price, the quantity supplied has decreased from 10 to 7 units
This movement is called a contraction in QS
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