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The firm is the main agent of supply (government may also supply some goods). An increase in price leads to an increase in supply as the incentive for firms to produce increases.

A supply curve slopes upwards.

Determinates of supply

The following factors may influence supply, shifting the supply curve to the left if less is supplied and to the right if there is an increase in supply.

1. Price of the goods
2. Goals of the firm
3. Changes in the price of all other goods
4. Changes in the costs of factors of production
5. Changes in the state of technology
6. Changes in legal restrictions
7. Imposition of a tax or subsidy

Also See

Take a look at the other unit 1 A level economics revision notes:

• The Economic Problem (AQA, Edex, OCR, WJEC)
• Factors of production (AQA, OCR)
• Positive and normative economics (AQA)
• Specialisation and Trade (AQA, Edex, OCR, WJEC)
• Producer and consumer surplus (AQA, Edex, OCR, WJEC)
• Demand theory (AQA, Edex, OCR, WJEC)
• Supply theory (AQA, Edex, OCR, WJEC)
• Supply and Demand Equilibrium (AQA, Edex, OCR, WJEC)
• Elasticity of demand (AQA, Edex, OCR, WJEC)
• Elasticity of supply (AQA, Edex, OCR, WJEC)
• The Price Mechanism (AQA, Edex)
• Indirect Taxes and Subsidies (Edex)
• The labour market (Edex)
• Economies of scale (AQA)
• Allocative efficiency (OCR)

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