Unit 2A: Market Forces (Supply), Kognity 2.2

Supply

Quantities of a good that firms are willing and able to supply at different possible prices, over a given time period, ceteris paribus.

Individual supply

The supply of a good or service by an individual producer

Market supply

The horizontal sum of the individual supply curves for a product of all the producers in a market.

Supply schedule

a table that shows the relationship between the price of a good and the quantity supplied

Law of supply

A law stating that as the price of a good rises, the quantity supplied will rise over a certain period of time, ceteris paribus.

Contraction in Quantity Supplied

As the price decreases, there is a contraction (decrease) in the quantity supplied. This causes a movement downwards along the supply curve.

Extension in Quantity Supplied

As the price decreases, there is an extension (increase) in the quantity supplied. This causes a movement upwards along the supply curve.

Increase in supply

a rightward shift of the supply curve

Decrease in supply

a leftward shift of the supply curve

Non-price determinants of supply

Changes in cost of factors of production (FOPs)
Prices of related goods (in the cases of joint and competitive supply)
Indirect taxes and subsidies
Future price expectations
Changes in technology
Number of firms

Average Cost (AC)

Total costs per unit of output produced.

Marginal Cost (MC)

The extra or additional costs of producing one more unit of output.

Total Cost (TC)

All the costs of a firm incurred for the use of resources to produce something.