Glossary
Change in Quantity Supplied
A Change in Quantity Supplied is a movement along a stationary supply curve, caused solely by a change in the price of the good or service itself.
Example:
When the price of concert tickets increases, the venue experiences a change in quantity supplied, offering more tickets along its existing supply curve.
Change in Supply
A Change in Supply is a shift of the entire supply curve (either left or right) caused by a change in one or more of the determinants of supply, meaning producers are willing to sell a different quantity at every price.
Example:
A new government regulation requiring expensive pollution controls for factories would cause a change in supply, shifting the entire supply curve for manufactured goods to the left.
Determinants of Supply
Determinants of Supply are non-price factors that cause the entire supply curve to shift, indicating a change in the quantity producers are willing to sell at every given price.
Example:
A new, more efficient production method is a determinant of supply that would shift the entire supply curve for smartphones to the right.
Expectations (Producer Expectations)
Producer Expectations are producers' beliefs about future prices or market conditions, which can influence their current decisions about how much to supply.
Example:
If farmers have expectations that corn prices will rise significantly next season, they might hold back some of their current harvest to sell later at a higher price.
Law of Supply
The Law of Supply states that, all else being equal, as the price of a good or service increases, the quantity supplied by producers also increases, and vice-versa.
Example:
When the price of rare collectible sneakers goes up, more sellers are motivated to supply them to the market, hoping for higher profits.
Market Equilibrium
Market Equilibrium is the state where the quantity demanded by consumers equals the quantity supplied by producers, resulting in a stable market price and quantity.
Example:
When the price of a popular new video game settles at a level where the number of copies gamers want to buy perfectly matches the number of copies the developers are willing to sell, the market has reached market equilibrium.
Number of Sellers/Producers
The Number of Sellers/Producers refers to the total count of firms or individuals actively producing and offering a good or service in a particular market.
Example:
When several new craft breweries open in a city, the number of sellers/producers of local beer increases, leading to a greater overall supply.
Resource Costs (Input Costs)
Resource Costs are the expenses incurred by producers for the factors of production, such as labor, raw materials, and capital, used to create a good or service.
Example:
If the price of coffee beans, a key ingredient, increases, the resource costs for coffee shops rise, leading to a decrease in the supply of brewed coffee.
Supply
Supply refers to the quantity of a good or service that producers are willing and able to sell at various prices within a specific time period.
Example:
A local bakery's supply of fresh bread might be 50 loaves per day at 5.
Supply Curve
The Supply Curve is a graphical representation showing the positive relationship between the price of a good or service and the quantity producers are willing to supply, typically depicted as an upward-sloping line.
Example:
Plotting the number of electric cars a manufacturer offers at different price points creates an upward-sloping supply curve for electric vehicles.
Taxes and Subsidies
Taxes are government levies that increase production costs and decrease supply, while subsidies are government payments that lower production costs and increase supply.
Example:
A government subsidy to renewable energy companies would lower their costs, increasing the supply of green energy, whereas a new tax on plastic bags would decrease their supply.
Technology/Productivity
Technology/Productivity refers to advancements in production methods or increased efficiency that allow producers to create more output with the same or fewer resources.
Example:
The development of faster computer chips significantly improved technology/productivity in the electronics industry, leading to a greater supply of devices.