How prices are determined - supply of goods + services

Supply

Amount of goods / services a producer / industry is willing + able to sell at a certain price

Supply curve

A graphic representation of the correlation between cost of a good / service + the quantity supplied for a given period (bottom left to top right)

Profit motive

The correlation between increased sales + increased profit (by selling more, more profit will be made)

Extension of supply

An increase in the quantity of supply (upward movement on the supply curve)

Contraction of supply

A decrease in the quantity of supply (downward movement on the supply curve)

Ceteris Paribus

A latin phrase “all other things being unchanged or constant “ (no change in anything else)

What are the factors that cause shifts in the supply curve?

• Productivity

• Indirect Tax

• Number of Other Firms

• Technology

• Subsidies / support

• Weather

• Costs of production

What causes movement along the supply curve?

A change in price

What causes a shift along the supply curve?

Non-financial factors