Supply

We took a look at how supply works , but what forces can cause an increase or a deacrease in Supply?

Visualizing a change in Supply

If Supply increases, then, for any price, the Quantity Supplied increases. The blue line moves to the right, as shown in the image below:

If Supply decreases, the reverse process happens.

Supply Shifters

The forces that affect supply are called Supply Shifters. There are 5 main Supply Shifters:

• Number of Producers: More Producers = More Supply.
• Productivity: As productivity increases, so does Supply.
• Taxes and Subsidies: This is how Governments can influence Supply.
• Price of Resources: If the resources needed get more expensive, Supply is reduced.
• Expectations / Speculation: A producer can store it's production, in order to sell it later, at a higher price, changing the Supply available now.

After talking about Supply, we're going to take a look at Demand.

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