Factors affecting Supply

Supply refers to the quantity of a good that the producer plans to sell in the market.

  • As price increases firms have an incentive to supply more because they get extra revenue (income) from selling the goods.
  • If price changes, there is a movement along the supply curve, e.g. a
    higher price causes a higher amount to be supplied.


Shifts in the Supply curve


An increase in supply occurs when more is supplied at each price, this could occur for the following reasons:

1. An decrease in costs of production, this means business can supply more at each price. Lower costs could be due to lower wages, lower raw material costs

2. An increase in the number of producers will cause an increase in supply

3. Expansion in capacity of existing firms, e.g. building a new factory

4. An increase in supply of a related good e.g. beef and leather

5. Climatic conditions are very important for agricultural products

6. Improvements in technology, e.g. computers, reducing firms costs

7. Lower taxes reduce the cost of goods

8. Increase in government subsidies will also reduce cost of goods


Definition: Joint Supply: Joint supply occurs when two goods are supplied together. E.g. If you produce beef you will get leather as a side effect.