Supply

Quantity supplied is the total amount per period of a given commodity that firms collectively are willing to sell. As with quantity demanded, this is a desired rather than an actual amount. Variables which affect quantity supplied include:

  1. own price (P);
  2. input prices (W);
  3. state of technological development;
  4. market structure;
  5. number of firms.
QS = g (P, W, etc...)

A graphical representation of this function with fixed values of all variables other than own price is called a supply curve:

QS = S (P)

This curve shows the quantity supplied Qs at specific prices P, ceteris paribus.

If input prices are fixed, it is usually the case that profits rise in response to a higher own price thereby inducing firms to produce more output.


A ceteris paribus change in any variable other than own price causes the supply curve to shift. If the variable in question is positively related to quantity supplied (the state of technological development, for example), then quantity supplied rises at every price so that the supply curve shifts to the right. If the variable is negatively related to quantity supplied (W, for example), then quantity supplied falls at every price so that the supply curve shifts to the left.