The Law of supply is the economic Law that determines the quantity supplied by the producers of a good depending on its price and other influencing factors.
Summary
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- 1 Offer
- 2 Factors that determine demand
- 3 Law of supply
- 4 Supply curve
- 5 Movements in the supply curve
- 6 Shifts in the supply curve
- 7 See also
- 8 Sources
Offer
The offer represents the quantities that the producers of a good are willing to offer at the different alternative prices.
Demand determining factors
- The price of the good: as the price of the good increases, the quantity supplied will increase and vice versa.
- Production costs: If costs increase, supply decreases and vice versa. As the price of the inputs of a good increases, its supply will decrease and vice versa. When speaking of the price of resources and inputs, he refers to the price of labor (wages), the price of raw materials, the price of energy, interest rates, etc.
- Production technology: as production technology improves, the supply of a good will increase.
- Expected future prices: If the price of the good produced is expected to increase in the short term, supply will increase, and vice versa.
- Number of bidders: With a larger number of bidders, the supply of a good will increase and vice versa.
- Taxes and subsidies: When taxes are established, supply is reduced and when subsidies are applied, supply is increased.
Law of supply
Economic law that determines that the quantity of a good offered increases as its price increases, keeping the remaining variables constant. The quantity offered is directly proportional to the price.
The increase in the price (P) causes an increase in the quantity supplied (Qs) and a decrease in the price causes a reduction in the quantity supplied.
Supply curve
The demand curve is the graphical representation of the relationship between quantity supplied and prices. It is a curve that shows the quantities of a good that a seller is willing to sell at different levels of alternative prices, assuming that all other determinants remain constant.
Supply curve
It has a positive slope, due to the direct relationship that exists between prices and quantities supplied.
Movements in the supply curve
The movements along the supply curve (variation of the quantity supplied) are caused by changes in the price of the determined good. When prices are high, the quantities supplied are high, and if prices decrease, the quantity supplied decreases.
As the price increases, the supply increases
Shifts in the supply curve
Shifts in the supply curve (variation in supply) are produced by changes in the rest of the factors that determine supply, except for the price of the product itself, that is, it is the result of changes in the cost of production, business taxes , the expected price or quantity, the change in the price of other goods produced, the change in the number of sellers, etc
