The Law of Supply

     The Law of Supply states that the quanity supplied varies directly with the price and all other variables are constant. When the price rises, the quanity supplied also goes up, but when the price drops, the producer also drops the quanity supplied.

     When graphed, a supply curve has a postive slope, with price on the y-axis and quanity on the x-axis. Movement along a supply curve means a change in price which equals a change in quanity supplied. A shift of the supply curve is caused by a change in one of the determinants of supply.

Determinants of Supply

change in:

  • cost of resources used to make the product
  • technology used to make the product
  • producer’s price expectations
  • producer’s ecpectations of cost of resources
  • number of sellers in the market (competition)

For example, if a new technology allows factories to produce iPhones more easily, the supply will increase as a result of a change in technology.

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