Supply
Cambridge IGCSE Economics 2.4
Producers supply different quantities at different prices. Understanding why and how the supply curve moves is essential to explaining how markets work.
Supply, Price & Quantity
What Is Supply?
Supply is the amount of a good or service that a producer is willing and able to supply at a given price in a given time period.
Think of it from the producer's perspective. If the price of coffee rises, Starbucks will want to produce more cups of coffee because they'll earn more profit per cup. But supply isn't just about wanting to—it's about being able to. If they don't have the resources to increase production beyond a certain point, that sets the limit on what they can supply.
Key Definition
Supply = the quantity producers are willing and able to supply at a given price in a given time period. Both conditions must be met.
The Supply Curve
A supply curve is a graph that shows the relationship between price and quantity supplied. Here's what makes it distinctive:
- It slopes upward. As price increases, quantity supplied increases. This makes sense: higher prices = higher profit per unit = producers want to supply more.
- It's usually drawn as a straight line, not a curve, for simplicity. In reality, the relationship might curve, but economists use straight lines to make analysis easier.
- The slope is positive: there is a direct (positive) relationship between price and quantity supplied.
Why? Rational, profit-maximising producers will increase supply when they can earn more profit. This is the logic behind the upward slope.
Smart Sibling Tip: The supply curve slopes upward because producers respond to incentives. Higher prices = stronger incentive to produce more. It's about profit maximisation.
Individual vs Market Supply
Every producer has their own supply curve. But in an exam, you often care about the market supply—the total amount all producers combined will supply at each price.
Market Supply
Market Supply = the sum of all individual supplies at each price level.
Example: Three bakeries in your town produce bread.
| Price per Loaf |
Bakery A Supply |
Bakery B Supply |
Bakery C Supply |
Market Supply |
| £1.50 |
100 loaves |
80 loaves |
50 loaves |
230 loaves |
| £2.00 |
150 loaves |
120 loaves |
80 loaves |
350 loaves |
| £2.50 |
200 loaves |
160 loaves |
110 loaves |
470 loaves |
Key insight: