Supply is the quantity producers are willing and able to sell at each price, over a set time.
The points to remember
- Willing: the producer wants to sell at that price.
- Able: the producer can produce it.
- At each price, over a period; market supply = every producer added across.
Example: a loaf of bread at €2
City Bakery
A loaf costs €1.20 to bake, so selling at €2 pays.
Corner Bakery
A loaf costs €2.50 to bake, so at €2 it would lose money.
Mill Bakery
Its oven is broken this week, so it cannot bake.
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The law of supply: as the price of a good rises, the quantity supplied rises, and as it falls, quantity supplied falls, ceteris paribus.
Our example (made-up numbers)
| Price of a loaf | Loaves offered per hour |
|---|---|
| €1.50 | 40 |
| €2.50 | 80 |
| €4 | 120 |
| €6 | 160 |
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The points to remember
- Price and quantity supplied move in the same direction.
- S slopes up; a price change is a movement along it.
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In the short run a firm has something it cannot change quickly, such as one oven. Adding workers to it raises output, but by less and less.
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The points to remember
- Diminishing marginal returns: with one input fixed, each extra worker adds less output.
- It happens because workers share the fixed input, here the oven.
If each extra worker adds fewer loaves, each extra loaf needs more wages. That is increasing marginal cost, and it is why supply slopes up.
Animated graph
Watch the graph build step by step in study mode.
The points to remember
- Marginal cost: the cost of producing one more unit.
- Diminishing returns make marginal cost rise as output rises.
- So a higher price is needed to make producers supply more.
- Put simply: a higher price means more profit on each unit, so producers offer more.
Remember it as: Fewer extra loaves per baker, so each extra loaf costs more: a higher price is needed.
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No paper has set this micro on its own yet. A Paper 1 part (a) could ask why supply slopes up, the reason taught only at Higher Level.
Explain why the supply curve for a good slopes upward.
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See the answer broken into clear points, with guidance on how each point earns marks.
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Watch the graph build step by step in study mode.
What the diagram must show
- Axes labelled P and Q; an upward-sloping curve labelled S.
- P1 → P2 on the price axis and Q1 → Q2 on the quantity axis.
- An arrow along S, and a sentence in your answer that points to it.
How the 10 marks are given
| Marks | What your answer needs |
|---|---|
| 9–10 | Theory fully explained, terms used correctly all the way through, the diagram included and fully explained |
| 7–8 | Theory explained, terms mostly right, the diagram included and explained |
| 5–6 | Theory partly explained, some terms, the diagram included |
| 1–4 | Theory only described or stated; few relevant terms |