Supply Curve and Market Dynamics

Flashcards covering key concepts related to supply, including definitions, the law of supply, factors influencing supply shifts, and their graphical representations in economics.

The Supply (in economics)

Shows the relationship between the price of a good and the quantity producers are willing and able to supply in the market, holding everything else constant, including revenue and profits for producers, and resources they want to buy.

Law of Supply

Describes a direct or positive relationship between price and quantity supplied; as price increases, quantity supplied increases, and vice versa.

Quantity Supplied (when price decreases)

According to the law of supply, if the price of a good decreases, the quantity supplied will also decrease.

Increase in Quantity Supplied

A movement up and to the right along the existing supply curve, caused by an increase in the good's price.

Upward Slope of the Supply Curve

Reflects the law of supply, indicating a direct relationship between price and quantity supplied.

Deriving Market Supply Curve

To derive the market supply curve from individual supply curves, one adds up the various quantities that individual sellers are willing and able to supply at different prices.

Increase in Supply

Indicates that more of a good will be supplied at every given price, resulting in a rightward shift of the supply curve.

Decrease in Supply

A leftward shift of the supply curve, meaning less of a good is supplied at every given price.

Effect of a Subsidy on Supply

If sellers receive a subsidy per unit of a good, the supply curve will shift graphically down (or to the right), increasing supply.

Effect of a Tax on Supply

If sellers have to pay a tax per unit of a good, the supply curve will shift graphically up (or to the left), decreasing supply.

Improved Production Efficiency

A discovery of a more efficient way to produce a good, lowering production costs, will cause a rightward shift of the supply curve.

Lower Worker Wages (effect on supply)

A decrease in the wages of workers employed in an industry, lowering production costs, causes a rightward shift of the supply curve for that product.

Anticipated Higher Future Price (effect on current supply)

Farmers withholding some of their current harvest from the market because they anticipate a higher price in the near future would cause a leftward shift in the current supply.

Anticipated Lower Future Price (effect on current supply)

Farmers selling some of their stored products because they anticipate a lower price in the near future would cause a rightward shift in the current supply.

Decrease in Number of Sellers

Would cause the market supply of a product to decrease, represented by a leftward shift of the supply curve.

Entry of New Firms

If new firms are entering the market of a product, the market supply of that product will increase, resulting in a rightward shift of the supply curve.