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Supply schedules and curves

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🔍 What is Supply?

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Supply is the quantity of a good or service that producers are willing and able to supply at a given price over a certain period.

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The Law of Supply The law of supply states that as the price of a product rises, businesses expand supply. This means:

Higher Price = Higher Quantity Supplied
Lower Price = Lower Quantity Supplied

💡 Why Does This Happen? Higher prices provide a profit incentive for firms to expand production. Thus, there is a positive relationship between price and quantity supplied.

🍎 For example, if a farmer finds that the price for apples has risen, they will likely decide to supply more apples because the higher price makes it more profitable to do so.

Supply schedules and curves

👉 Similar to a demand schedule, A supply schedule is a table that shows the quantity supplied at each price.

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Types of Supply Schedules

Individual supply Schedule: This is a table that shows the quantities of a good that a single producer is willing to supply at different prices. A graphical representation of the individual supply schedule is called the individual supply curve.

Market supply Schedule: This is a table that shows the total quantities of a good that all producers in a market are willing to supply at different prices. A graphical representation of the market supply schedule is called the market supply curve.

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A supply curve is a graph that shows the quantity supplied at each price. Sometimes called a supply schedule, it visually represents the relationship between price and quantity supplied.

The x-axis represents the quantity supplied, while the y-axis shows the price per unit. As the price increases, the quantity supplied generally increases, reflecting the law of supply.

Individual supply schedule and individual supply curve

Imagine there's only one farmer, Steve, who sells amazing apples. Here's an example of the quantity supplied for Steve at different prices:

Price per lb (in £)	Quantity Supplied (in lb)
1.00	50
1.50	70
2.00	100
2.50	130
3.00	160
3.50	200

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In this supply schedule, as the price per pound of apples increases, the quantity of apples supplied by Steve also increases. This illustrates the law of supply, which states that higher prices lead to a higher quantity supplied.

We can use this supply schedule to compute a supply cure:

Market supply schedule and market supply

Let's imagine there are now three farmers in the market: Steve, Sophie, and Chris. To calculate the market supply, we add up each farmer's individual supply of apples to get the total supply available in the market. Here is an example of the market supply schedule:

We can then use the market supply schedule to show the market supply curve: