2.6 Supply Explain what is meant by supply Construct a supply curve Explain shifts along the supply curve.

Key Term – Supply – The quantity a producer is willing and able to produce at a given price in a given period. With supply, the higher the price, the greater the profit and therefore the more supplied.

Supply Curve

Movements along the supply curve, either extension or contraction are all caused by a change in price. A – B = extension in Supply A-C = contraction in Supply

Shifts in Supply Curve

Supply curve shifts to the right, there is an increase in supply. Supply curve shifts to the left, there is a decrease in supply.

CAUSES OF THE SUPPLY CURVE SHIFTING. PINTSWC PRODUCTIVITY INDIRECT TAXES NUMBER OF FIRMS ENTERING MARKET TECHNOLOGY SUBSIDIES WEATHER COSTS OF PRODUCTION

Productivity - If productivity increases, supply can be increased Productivity - If productivity increases, supply can be increased. Curve moves to the right. Costs of Production – deal with as part of Indirect taxes. If the costs of producing a product increase (labour, materials etc) then the supply curve will shift to the left, as less supplied.

Indirect Taxes – Here the supply curve shifts left. EG – Tax on cigarettes of say a £1, therefore a tax on the producer. Therefore the tax will increase the costs of production and supply curve moves to the left. The supply curve moves vertically upwards by the amount of tax New price is P1 – I.E the producer has passed on 2/3 of the tax to the consumer. If he passed on all the tax to consumer it would have been P2.

Technology- an increase in better and more advanced technology should help with an increase in production – supply curve shift to the right. Subsidies – Governments can give subsidies to firms. By doing this the supply curve shifts to the right. Weather – Mainly affects crops. Bad weather = bad crop means supply curve shifts left.