2.3 Supply: Paper 1: OCR A-level Economics Revision and Macroeconomics

Individual Supply

Individual supply is the supply that a producer is willing and able to sell at a given price in a given period of time.

Market Supply

Market supply is the sum of all individual supplies in a market.

Types of Supply

1. Joint supply

2. Composite supply

3. Competitive supply

Joint Supply

This is when increasing the supply of one good causes an increase or decrease in the supply of another good. For example, producing more lamb will increase the supply of wool.

Composite Supply

This occurs when a good or service can be obtained from different sources. For example, light can be produced from candles, electricity and gas.

Competitive Supply

If the raw materials producing the good in composite supply are perfect substitutes of each other, the sources of supply are in competition to satisfy a particular need or want. For example, if electricity and candles were substitutes and cost the same to produce, they would compete to produce the good, light.

Productivity

Higher productivity causes an outward shift in supply, because average costs for the firm fall.

Indirect Taxes

Inward shift in supply.

Number of Firms

The more firms there are, the larger the supply.

Technology

More advanced the technology causes an outward shift in supply.

Subsidies

Subsidies cause an outward shift in supply.

Weather

This is particularly for agricultural produce.

Favourable conditions will increase supply.

Costs of Production

If costs of production fall, the firm can afford to supply more. If costs rise, such as with higher wages, there will be an inward shift in supply.