Question

What is the difference between a change in supply and a change in quantity supplied? What is the law of supply? What are the main variables that will cause a supply curve to shift? Please give an example of each.

Answer 1

A change in the supply refers to a shift in the supply curve whereas change in quantity supplied refers to a movement along the supply curve.

Law of supply - it states that there is a positive relationship between price and the quantity supplied. If price of a good increases the quantity supplied also increases and vice versa

Main variables

1. change in resources- A decrease in the price of wood increases the supply of furniture
2. change in technology- the development of more effective wireless technology increases the supply of cell phones.
3. changes in taxes and subsidies-an increase in the excise tax on Alcohol reduces the supply of Alcohol
4. change in prices of other goods- An increase in the price of coffee decreases the supply of tea
5. change in producer expectation- an expectation of a rise in future car prices decreases the supply of cars today.
6. change in number of suppliers- an increase in the number of ice cream corners increases the supply of ice cream