Find this:    any language EnglishChineseCzechDanishDutchEstonianFinnishFrenchGermanGreekHebrewHungarianIcelandicItalianJapaneseKoreanLatvianLithuanianNorwegianPolishPortugueseRomanianRussianSpanishSwedish

Sign my Guestbook

Read my Guestbook

Supply refers to the various quantities that will be offered for sale at various prices at some point in time. Supply, like demand, also refers to the schedule of prices and quantities.

However, unlike demand, prices and quantities share a DIRECT relationship when dealing with supply theory. As prices (P) increase, quantity (Q) will also increase; OR as prices (P) decrease, quantity (Q) will also decrease.

Firms will sell MORE (supply a good) at higher prices. (Think of it as you're a business who sells shoes. Won't you want to sell more if you can sell each pair for $100 instead of $50, ceteris paribus?)

Price changes will cause quantities supplied to change which is seen as a movement along the supply curve (graph not shown here). This is also known as a "Change in Quantity Supplied".

A change in supply is due to non-price determinants, and these determinants are denoted by using the acronym "INERT". Remember that these changes actually move the entire supply curve, since they are not classified as changes in quantity supplied.

Input Prices

• refers to the costs of materials to make the products (Factors of Production)

• as input costs increase, the supply curve will shift to the left (ceteris paribus)

Number of Producers

• as the number of producers increase, the supply curve will shift to the right

Expectations of Future Prices

• if a firm predicts that prices will drop, it will produce less

• if a firm predicts that prices will rise, it will produce more now and stockpile (then sells them later at a higher price)

Related Goods

• substitute products

• joint products - as price of beef is increased, so will leather

Technology

• an increase in technology is accompanied by an increase in supply (increase in efficiency)