Supply, Demand and Equilibrium

The Law of Supply

Contributors
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Carys Brown

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The Law of Supply
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The Law of Supply states that as the price of a product rises, then the qaunitity supplied rises also. Quantity supplied refers to buisness's willingness to produce a good or service. An easy way of remembering this law is to think from the perspective of a business or firm; the higher the price per good, means that firms are willing to produce a larger qaunitity of goods in order to receive more profit. The opposite occurs when the price of goods falls.  

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The Effects in Changes in Price
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When there is a change in the price of the good, then there will be a movement along the supply curve.


As shown by the model...

  • An increase in price will increase the quantity supplied, as producers are willing to produce more goods if they are going to receive a higher price per good. This will cause the equilibrium to shift to point (Q1, P1) on the model, demonstrating an expansion of the market

  • A decrease in price will decrease the quantity demanded, because, producers are less willing to produce goods for a lower price. This will cause the equilibrium to shift to point (Q1, P1) on the model, demonstrating a contraction of the market.

Topic Menu
The Law of Supply
Non-Price Factors of Supply
The Effects of Changes of Non-Price Factors - Supply
The Law of Demand
Non-Price Factors of Demand
Effects of Changes in Non-Price Factors - Demand
Market Equilibrium
The Concept of Surplus' and Shortages
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