Supply

Supply is the quantity of a product that a producer is willing and able to supply onto the market at a given price in a given time period.



Factors leading to a change in supply:

1. Changes in costs of production.

An increase in the cost of producing an item is likely to lead to a higher price.

In turn this is likely to reduce sales and profits.

A business is therefore likely to supply less to the market.

2. Introduction of new technology.

New technology will probably mean costs will fall.

This would allow a business to supply more at the same, or lower price.

3. Indirect taxes.

These are taxes on customers spending, the main one being Valued Added Tax (VAT).

If  indirect taxes were imposed or went up, prices would rise and customers would buy less.

Supply is therefore likely to fall.

4. Government subsidies.

This is money paid by the government / European Union to help reduce costs in a particular industry.

Reduced costs in an industry is likely to increase supply.

5. External shocks.

These could include:

Poor weather conditions, typhoons, drought and war, tend to reduce crop yealds or the availability of of products such as oil which can lead to reductions in supply. 

Click on picture for video.