The quantity supplied is the amount of something a business wants to sell at a given price, holding constant any other factor that may influence a business’ supply decision (e.g. costs and government actions).
A supply curve shows how the quantity supplied by a business changes as price changes (holding all other factors equal).
As the price increases, firms supply more.
The Supply Curve
Effects of Price on Supply
Although the Law of Demand says the demand curve slopes down, there’s no Law of Supply requiring a particular slope – it can slop up, vertical, horizontal or down.
Effects of Other Variables on Supply
Some other factor other than the product’s price may affect the supply of a good/service, causing a shift in the supply curve.
For example, suppose there’s some land suitable for growing coffee and cocoa. If the price of cocoa increases, some coffee farmers may switch to growing cocoa. Therefore, when the price of cocoa rises, the supply of coffee at any given coffee price falls.
Supply Curve Shift
S1 is the supply curve of coffee before the price of cocoa increases, S2 is after. So the increased price of cocoa causes the coffee supply curve to shift left as firms want to supply less coffee at any given price now cocoa prices have changed.
Importantly:
A change in the coffee price causes a change in the quantity supplied: a movement along the supply curve.
When costs, government rules, or other variables that affect supply change, the entire supply curve shifts.
