IB Economics 2.2.1 the Law of Supply Notes

The Law of Supply: A Higher Price Brings More Supply

Definition

Supply

The quantity of a good or service a firm (or multiple firms) is willing and able to produce for a given price in a given time period, ceteris paribus.

Definition

Law of Supply

There is a direct, positive relationship between price and quantity supplied.

Supply is the quantity of a good a firm is willing and able to produce at each price over a given period.

The law of supply says price and quantity supplied move in the same direction.

As price rises, quantity supplied rises; as price falls, it falls.

A higher price earns more on each unit, so firms have an incentive to produce more; a lower price shrinks the profit per unit, so they produce less.

A price change moves the firm along a fixed supply curve, a change in quantity supplied, not a change in supply.

The whole curve shifts only when something other than price changes, such as costs or technology.

Example

A firm sells apples at 1 dollar each, earning 1 dollar per apple.
If the price rises to 2 dollars, each apple now earns 2 dollars, so the larger profit encourages the firm to produce more and quantity supplied rises.

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Note

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Tip

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Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.

Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.

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Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

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Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Duis aute irure dolor in reprehenderit

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

IB Economics 2.2.1 the Law of Supply Notes

The Law of Supply: A Higher Price Brings More Supply

Short Run and Long Run: Which Inputs a Firm Can Change (HL)

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

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The Law of Supply: A Higher Price Brings More Supply

Short Run and Long Run: Which Inputs a Firm Can Change (HL)

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

IB Economics 2.2.1 the Law of Supply Notes

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

The Law of Supply: A Higher Price Brings More Supply

Short Run and Long Run: Which Inputs a Firm Can Change (HL)

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account

The Law of Supply: A Higher Price Brings More Supply

Short Run and Long Run: Which Inputs a Firm Can Change (HL)

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account