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Welcome to my wall, here you will learn what the law of supply is, how it works, and why it is important for businesses. You can learn all about it here through a series of videos, images, and links to websites that will teach you what you need to know or possibly more.

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This supply curve explains how the law of supply works, as the law of supply states the more of a good will be supplied the higher its price, and the less will be provided the lower its price.

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This is a supply schedule, it calculates the product's price and quantity supplied at each price over some time, supply schedules provide information about how producers respond to price changes and help analyze market dynamics and determine market equilibrium.

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I chose this website because I heard that it is a very trusted source for economics, so this source explains what the law of supply is, how it works and points out the most important aspects of this topic, this website also explains the supply curve, provides examples of the law of supply, and lets us know the five different types of supply, such as market supply, short term supply, long term supply, joint supply, and composite supply.

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What Is the Law of Supply?

The law of supply is a microeconomic law. It states that, all other factors being equal, as the price of a good or service increases, the quantity of that good or service that suppliers offer will increase, and vice versa.

In plain terms, this law means that as the price of an item goes up, suppliers will attempt to maximize their profits by increasing the number of that item that they sell.

Key Takeaways

Understanding the Law of Supply

The chart below depicts the law of supply using a supply curve, which is upward sloping. A, B, and C are points on the supply curve. Each point on the curve reflects a direct correlation between quantity supplied (Q) and price (P). So, at point A, the quantity supplied will be Q1 and the price will be P1, and so on.

The supply curve is upward sloping because, over time, suppliers can choose how much of their goods to produce and later bring to market. At any given point in time, however, the supply that sellers bring to market is fixed, and sellers simply face a decision to either sell or withhold their stock from a sale; consumer demand sets the price, and sellers can only charge what the market will bear.

If consumer demand rises over time, the price will rise, and suppliers can choose to devote new resources to production (or new suppliers can enter the market), which increases the quantity supplied. Demand ultimately sets the price in a competitive market; supplier response to the price they can expect to receive sets the quantity supplied.

The law of supply is one of the most fundamental concepts in economics. It works with the law of demand to explain how market economies allocate resources and determine the prices of goods and services.

Examples of the Law of Supply

The law of supply summarizes the effect price changes have on producer behavior. For example, a business will make more video game systems if the price of those systems increases. The opposite is true if the price of video game systems decreases. The company might supply 1 million systems if the price is $200 each, but if the price increases to $300, they might supply 1.5 million systems.

To further illustrate this concept, consider how gas prices work. When the price of gasoline rises, it encourages profit-seeking firms to take actions to expand supply, such as:

Increase exploration for oil reserves.

Drill for more oil.

Invest in more pipelines and tankers to bring the oil to plants where it can be refined into gasoline.

Build new oil refineries.

Purchase additional pipelines and trucks to ship the gasoline to gas stations.

Open more gas stations.

Keep existing gas stations open longer hours.

The law of supply is so intuitive that you may not even be aware of all the examples around you. For example, when college students learn that computer engineering jobs pay more than English professor jobs, the supply of students with majors in computer engineering increases. If consumers start paying more for cupcakes than for donuts, bakeries will increase their output of cupcakes and reduce their output of donuts to increase their profits.

The law of supply can even impact your own employment. When your employer pays time and a half for overtime, the number of hours you are willing to supply for work might increase.

What Are the Types of Law of Supply?

There are five types of supply-market supply, short-term supply, long-term supply, joint supply, and composite supply. Meanwhile, there are two types of supply curves-individual supply curves and market supply curves. Individual supply curves graph the individual supply schedule, while market supply curves represent the market supply schedule.

What Factors Affect Supply?

Supply is influenced by prices and consumer demand. The number of suppliers available, the level of competition, the state of technology, and the presence of government support or restriction will play important roles. For certain products like agricultural commodities, supply is also impacted by factors such as weather and crop yields.

What Is the Law of Demand?

The law of demand is a fundamental principle of economics that states that at a higher price consumers will demand a lower quantity of a good, and vice-versa.

What Is Supply and Demand?

The law of supply and demand outlines the interaction between a buyer and a seller of a resource. Supply and demand says that sellers will supply less of a product or resource as price decreases, while buyers will buy more, and vice versa, until an equilibrium price and quantity is reached. It incorporates both the law of supply and the law of demand.

The Bottom Line

The law of supply states that a higher price for a good or service will lead producers to supply more of that good or service to the market. This is because businesses want to increase their profits. When they can get a higher price for something, they will produce more of it than they will of other, lower-priced goods and services.

On the other hand, if prices fall, suppliers won't produce as much. The law of supply is one part of the law of supply and demand.

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The Law of Supply Explained, With the Curve, Types, and Examples

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The law of supply in economics states that as the price of a good or service increases, the quantity of goods or services increases and vice versa. Learn more.

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I chose this website because it provides real-life examples of when the law of supply is applied, and even explains why the law of supply is important for businesses, as it helps them with things such as increasing their profit, predicting their revenue, and understanding their market conditions, and it even explains the law of supply formula and what factors affect it, this website will teach you a lot about the law of supply with just one read.

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This website discusses the factors that affect supply in economics. It explains that supply is determined by factors such as price, improvements in technology, weather conditions, lower taxes, productivity of workers, etc. The article also explains the concept of movement along the supply curve and shifts in the supply curve. It further discusses factors that cause shifts in supply to go to the left or to the right, the article also talks about factors that affect the supply of labor and the impact of supply-side shocks on inflation.

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Supply refers to the quantity of a good that the producer plans to sell in the market.

As price increases firms have an incentive to supply more because they get extra revenue (income) from selling the goods.

If price changes, there is a movement along the supply curve, e.g. a higher price causes a higher amount to be supplied.

Movement along the supply curve

Shifts in the Supply curve

This occurs when firms supply more goods - even at the same price.

An increase in supply occurs when more is supplied at each price, this could occur for the following reasons:

1. A decrease in costs of production. This means business can supply more at each price. Lower costs could be due to lower wages, lower raw material costs

2. More firms. An increase in the number of producers will cause an increase in supply.

3. Investment in capacity. Expansion in capacity of existing firms, e.g. building a new factory

4. Related supply. An increase in supply of a related good e.g. beef and leather

5. Weather. Climatic conditions are very important for agricultural products

6. Technological improvements. Improvements in technology, e.g. computers, reducing firms costs

7. Lower taxes. Lower direct taxes (e.g. tobacco tax, VAT) reduce the cost of goods

8. Government subsidies. Increase in government subsidies will also reduce the cost of goods, e.g. train subsidies reduce the price of train tickets.

Definition: joint supply

Joint supply occurs when two goods are supplied together. E.g. If you produce beef you will get leather as a side effect.
Related

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Factors affecting Supply - Economics Help

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Supply refers to the quantity of a good that the producer plans to sell in the market. As price increases firms have an incentive to supply more because they get extra revenue (income) from selling the goods. If price changes, there is a movement along the supply curve, e.g.

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I chose this website to introduce the supply curve which has a similar purpose to a supply schedule, it illustrates the law of supply and calculates the availability of products and services. It typically slopes upward from left to right, indicating that producers are willing to supply more of a good or service as its price increases, and less of it as its price decreases. There are several factors that can affect the position and shape of the supply curve, including production costs, technology, input prices, government regulations, and expectations about future prices.

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What Is a Supply Curve?

The supply curve is a graphic representation of the correlation between the cost of a good or service and the quantity supplied for a given period. In a typical illustration, the price will appear on the left vertical axis, while the quantity supplied will appear on the horizontal axis.

Key Takeaways

How a Supply Curve Works

The supply curve will move upward from left to right, which expresses the law of supply: As the price of a given commodity increases, the quantity supplied increases (all else being equal).

Note that this formulation implies that price is the independent variable, and quantity the dependent variable. In most disciplines, the independent variable appears on the horizontal or x-axis, but economics is an exception to this rule.

If a factor besides price or quantity changes, a new supply curve needs to be drawn. For example, say that some new soybean farmers enter the market, clearing forests and increasing the amount of land devoted to soybean cultivation. In this scenario, more soybeans will be produced even if the price remains the same, meaning that the supply curve itself shifts to the right (S ₂) in the graph below. In other words, supply will increase.

Other factors can shift the supply curve as well, such as a change in the price of production. If a drought causes water prices to spike, the curve will shift to the left (S ₃). If the price of a substitute-from the supplier's perspective-such as corn increases, farmers will shift to growing that instead, and the supply of soybeans will decrease (S ₃₎.

If a new technology, such as a pest-resistant seed, increases yields, the supply curve will shift right (S ₂). If the future price of soybeans is higher than the current price, the supply will temporarily shift to the left (S ₃), since producers have an incentive to wait to sell.

Supply Curve Example

Should the price of soybeans rise, farmers will have an incentive to plant less corn and more soybeans, and the total quantity of soybeans on the market will increase.

The degree to which rising price translates into rising quantity is called supply elasticity or price elasticity of supply. If a 50% rise in soybean prices causes the number of soybeans produced to rise by 50%, the supply elasticity of soybeans is 1.

On the other hand, if a 50% rise in soybean prices only increases the quantity supplied by 10 percent, the supply elasticity is 0.2. The supply curve is shallower (closer to horizontal) for products with more elastic supply and steeper (closer to vertical) for products with less elastic supply.

Special Considerations

The terminology surrounding supply can be confusing. "Quantity" or "quantity supplied" refers to the amount of the good or service, such as tons of soybeans, bushels of tomatoes, available hotel rooms, or hours of labor. In everyday usage, this might be called the "supply," but in economic theory, "supply" refers to the curve shown above, denoting the relationship between quantity supplied and price per unit.

Other factors can also cause changes in the supply curve, such as technology. Any advances that increase production and make it more efficient can cause a shift to the right in the supply curve. Similarly, market expectations and the number of sellers (or competition) can affect the curve as well.

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The supply curve is a graphic representation of the correlation between the cost of a good or service and the quantity supplied for a given period. In a typical illustration, the price will appear on the left vertical axis, while the quantity supplied will appear on the horizontal axis.

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This video serves as a great introduction, it explains the law of supply and its relationship with price and quantity supplied, it also highlights the factors that affect suppliers' decisions, such as profitability and cost production. It explains that businesses raise the price to make more profit and produce more supply, but if the price drops, not much profit can be made and therefore, the production of supply is reduced.

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This video is about studying the behavior of sellers and explaining the factors that affect supply which are also known as determinants, and explains their relationship with the law of supply, the factors are price, input prices, technology, and producer expectations. It also discusses the two changes in supply, and how the supply curve adjusts when factors change, the determinants of the supply curve are crucial for understanding how the sellers in the economy will respond to price and other factors, influencing the overall supply of goods.

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The Law of Supply and the Supply Curve Ft. Mr. Beat

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In this video, the law of supply is explained using a supply schedule, which is explained in more detail in the video. This supply schedule uses grape farming scenarios to illustrate how an increase in price leads to an increase in supply, whereas a decrease in price leads to a decrease in supply. In essence, the supply table is a graph that calculates how much a producer is willing and able to produce over time, so it is of great importance to both economists and business owners.

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Law of supply | Supply, demand, and market equilibrium | Microeconomics | Khan Academy

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This video talks about the supply curve, which could be considered another version of the supply schedule, both are pretty similar even conveying the same information and what it is used For, but they do illustrate supply differently, as the price of a commodity increases, the amount of supply will increase as the supply curve moves upward. As an example, the video uses oil and explains how it is cheaper to extract in some countries while it is more expensive in other countries due to the extraction process.