2.2 Supply

• Supply shows the relationship between price and quantity supplied

• Quantity supplied usually rises as price rises, ceteris paribus

• The law of diminishing marginal returns helps explain rising production costs

• Increasing marginal costs help explain the upward-sloping supply curve

• Supply can be represented by an upward-sloping supply curve

• Diagram: upward-sloping supply curve

• Market supply is derived from individual producers' supply

• Supply analysis distinguishes firm behaviour from total market behaviour

• Supply shifts with factor costs, related goods prices, indirect taxes, subsidies, future price expectations, technology, and number of firms

• Related goods include joint and competitive supply cases

• A price change causes movement along a supply curve

• Non-price determinants shift the supply curve

• Diagram: movements along and shifts of the supply curve