1. Starter Activity In pairs consider what might cause
Mercedes Benz to decide to cut back on production of cars
Travel agents to put more emphasis on selling low-cost UK holiday rather than expensive over-seas holiday
Umbro to increase production of England replica football shirts

2. Lesson Objectives To understand what influences the level of supply
To understand how the supply curve is determined and what can cause it to shift

3. Market Supply
The combined quantity that all producers are willing to sell at any given price is known as the market supply.
As a general rule, higher prices will lead to more being supplied as there are potentially higher profits to be made per unit
In the long term – resources will move between industries looking for highest rates of return – in other words supply will diminish in industries where there are little opportunity for profit to be made

4. Consider this example
A Farmer has 10, 2 acre fields and is deciding which crops to sow
What would you do and why?
Crop & Potential output (Tonnes per acre)
Cost of seed (£ per tonne)
2015 prices received (£ per tonne)
Expected 2016 prices (£ per tonne)
Wheat (5) 50
150
160
Barley (5)
250
220
Potatoes (3) 40
Beetroot (3)
200
190

5. Supply Curve
Shows the relationship between price and supply

6. The Supply Curve Price £ Supply £7 £3 800 200
The supply curve slopes upwards from left to right indicating a positive relationship between supply and price. As price rises, it encourages producers to offer more for sale whereas a fall in price would lead to the quantity supplied to fall. £3
200
800

7. Shifts in Supply
Shifts can be brought about by many things, but are generally done so by an expansion or shrinking of the industry – some examples include
New technology – new products replacing traditional
Price/availability of raw materials
Improved efficiency – could lead to increase in supply
Alternative industries
Human Resource issues – e.g. Unions, motivation, retirement age, etc
Law change

8. Shifts in Supply Price £ S1 Supply S2 £4 100 400 900
Changes in any of the factors affecting supply other than price will cause the entire supply curve to shift. A shift to the left results in a lower supply at each price; a shift to the right indicates a greater supply at each price. £4
100
400
900

9. Homework Task
Investigate two industries – one where Supply has increased and one where Supply has decreased – consider the reasons for the change
This will be presented to the class next lesson

10. Plenary
Refer back to starter – how would the changes form the starter be shown on a supply curve diagram?