Supply, Price & Quantity | Economics for GCSE/IGCSE - Year 11 PDF Download

Introduction to Supply

• Supply in economics refers to the quantity of a specific good or service that producers are willing and able to provide at various prices during a specified period.
• When represented graphically, the supply curve illustrates the relationship between price levels and the quantity of a good or service that producers are are willing to supply in the market.
• While in reality, the data may form a curve, economists often use straight lines to create supply curves for simplicity and ease of analysis.
• The upward slope of the supply curve indicates a positive correlation between price and the quantity supplied by producers. As prices increase, rational producers seek to supply more to maximize their profits.

Individual & Market Supply

• Market supply represents the collective sum of all individual supplies for a particular good or service.
• It is determined by aggregating the individual supply quantities across various price levels.
• Calculating market supply involves summing up the quantities supplied by each seller at different price points.
• At each price level, the total supply from all suppliers contributes to the overall market supply.
  
• Individual and market supply can also be depicted visually through graphs:
  
• Diagram Analysis:
  • In New York City, the market supply for smartphones in December is primarily the combination of iPhone & Samsung supply.
  • At a price of $1000, the supply of iPhones is 300 units, and the supply of Samsung phones is 320 units.
  • At a price of $1,000, the market supply of smartphones in New York City during December is 620 units.

Movements Along a Supply Curve

• If price is the only factor that changes (ceteris paribus), there will be a change in the quantity supplied (QS). This change is shown by a movement along the supply curve.

Diagram Analysis:

• An Increase in Price:
  • When the price increases from £7 to £9, it results in a movement up the supply curve from point A to B.
  • This price increase leads to a rise in the quantity supplied from 10 to 14 units, known as an extension in quantity supplied (QS).
  • For example, if the price of oranges increases from £1 to £2 per orange, farmers might decide to supply more oranges to the market.
• A Decrease in Price:
  • If the price decreases from £7 to £4, there is a movement down the supply curve from point A to C.
  • This price drop causes a decrease in the quantity supplied from 10 to 7 units, referred to as a contraction in quantity supplied (QS).
  • For instance, if the price of laptops falls, suppliers may reduce the number of laptops they are willing to supply.