Key Idea: Supply is the other half of every market: how much firms are willing and able to sell at each price. A higher price means more is supplied, because there is more profit in it. And the same two rules as demand: the good's own price moves you along the curve, anything else moves the curve. Where you meet it:
Paper 1
- Essays.
- Explain [10]: two determinants that raise supply, or why falling supply raises price while a higher price raises quantity supplied.
Paper 2
- Data response.
- Explain [4] with a diagram: cheaper machinery, better roads or cheaper credit cut costs, so supply shifts right and the price falls.
Every later diagram
- Same curve, new setting.
- Indirect taxes and subsidies later in Unit 2 work by moving supply.
📈 What supply is, and why it slopes up
Supply is the quantity of a good producers are willing and able to sell at each price, over a period of time. Price on the vertical axis, quantity on the horizontal, and the curve slopes up: as price rises, firms sell more.
| Why firms sell more when price rises | What happens |
|---|---|
| Profit motive | a higher price means more profit on each unit, so making more is worth it |
| Rising costs | extra units cost more to make (overtime, less suitable resources), so firms need a higher price to cover each extra one |
| Ceteris paribus | everything else is held still, so price is the only cause on the table |
Supply slopes up from near the origin. Draw it the other way and you have drawn demand. Willing and able, over a period of time: the same phrase as demand, from the seller's side.
🔄 What shifts the curve
Anything that makes producing or selling cheaper shifts supply right: more offered at every price. Anything that makes it more expensive shifts supply left.
| Determinant | Supply shifts right when… | Example |
|---|---|---|
| Costs of production | wages, materials or energy get cheaper (dearer costs shift it left) | aluminium gets cheaper, so bikes cost less to make |
| Technology | a better method cuts the cost of each unit | a machine uses less electricity per unit |
| Government | a subsidy is paid per unit (an indirect tax shifts it left) | a subsidy on every solar panel installed |
| Number of firms | new firms enter the market | three new bakeries open in town |
| Weather and nature | a good harvest (drought or disease shift it left) | a bumper wheat crop |
| Expectations | firms expect the price to fall, so they sell now (expecting a rise, they hold stock back) | oil producers releasing stored oil |
Important: Supply decreased on its own earns nothing. Chain it: fuel got more expensive → the cost of each unit rose → firms offer less at every price → supply shifts left. A change in an input price shifts supply. A change in the good's own price moves along it.
↔️ Movement or shift? And which curve?
Two questions before you draw. Did the good's own price change, or something else? And is that something a seller's reason or a buyer's reason?
Own price changed: movement along S: Price rises: quantity supplied **extends** (up and right).. Price falls: quantity supplied **contracts** (down and left).. Same direction as price: the opposite of demand.. Say **change in quantity supplied**..
A seller's reason changed: S shifts: Costs, technology, taxes and subsidies, number of firms, weather.. Right = **increase in supply**. Left = **decrease in supply**.. Say **change in supply**.. A **buyer's** reason (income, tastes, related goods) shifts **demand** instead..
| Price | Quantity | So which curve shifted? |
|---|---|---|
| up | up | demand shifted right |
| down | down | demand shifted left |
| up | down | supply shifted left |
| down | up | supply shifted right |
Falling supply raises price. The curve shifts left; at the old price buyers want more than firms now offer, so there is a shortage and the price is bid up. A higher price raises quantity supplied. That is an extension along the new curve. It still ends below the original quantity, because it starts from a curve further left.
✍️ Worked examples
The three shapes this topic is asked in, with new scenarios. Try each before opening the plan.
The price of aluminium falls sharply, cutting the cost of making bicycles. Using a demand and supply diagram, explain the effect on the market for bicycles.
Model answer plan
See the mark-by-mark plan — for / against / judgement, with marking guidance — in study mode.
Now the Paper 1 shapes.
Using a demand and supply diagram, explain two non-price determinants that could increase the market supply of electric scooters.
Model answer plan
See the mark-by-mark plan — for / against / judgement, with marking guidance — in study mode.
And the one that tests the words.
A drought cuts the olive harvest. Using a demand and supply diagram, explain why the fall in supply raises the price of olive oil while the higher price raises the quantity supplied.
Model answer plan
See the mark-by-mark plan — for / against / judgement, with marking guidance — in study mode.
Animated graph
Watch the graph build step by step in study mode.
✅ Quick self-check
Tap each card to check yourself.
Define supply, including the two words that matter. The quantity producers are willing and able to sell at each price, over a period of time.
Why does a higher price make firms produce more? More profit on each unit, so extra output is worth making, even when the extra units cost more to produce.
Cocoa gets more expensive. Movement or shift, for chocolate? Shift left. Cocoa is an input, so the cost of each bar rises and less is offered at every price. Say decrease in supply.
Chocolate sells for more. Movement or shift? Movement up and right along the curve: quantity supplied extends. The good's own price changed, nothing else.
Price went up and quantity went down. Which curve moved? Supply shifted left. When demand moves, price and quantity go the same way. When supply moves, they go opposite ways.
A subsidy is paid on every unit. Which way does supply shift? Right. The subsidy cuts the cost of each unit to the firm, so more is offered at every price. An indirect tax does the opposite.
Firms expect prices to rise next month. What happens to supply today? It shifts left today: firms hold stock back to sell later at the higher price. Common in oil and other commodity markets.
Supply falls and the price rises. Does that higher price shift supply back? No. The higher price causes an extension along the new curve, a change in quantity supplied. Only a seller's reason shifts the curve.
Exam tips
- Willing and able, over a period of time. Same phrase as demand, from the seller's side.
- Supply slopes up from near the origin. Drawn the other way, it is a demand curve.
- Own price changes: movement along, and the words are quantity supplied. Anything else: shift, and the word is supply.
- Name the cause before the shift: cheaper aluminium → lower cost per bike → more offered at every price → supply shifts right.
- Told what happened to price and quantity? Same direction means demand moved. Opposite directions means supply moved.
- Keep S₁ on the page, label the new curve S₂, and say which curve a movement runs along.
- Two determinants means two different ones.