Supply — Edexcel A-Level Business
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Supply explained
Supply is what producers are willing and able to offer at each price, so the conditions of supply are the factors that change that willingness at every price level.
Read the full explanation
Higher wages, energy or raw materials push the curve left and upward, while new technology or automation push it right by cutting cost per unit. An indirect tax behaves like a cost and moves supply left by the tax per unit, a government subsidy moves it right, and external shocks from weather or supply chain disruptions can strip out capacity overnight. Managers use this to anticipate input costs, to choose sourcing policies, and to judge how much of a cost rise can be passed on before volume collapses.
Your focus
- Identify the factors that lead to a shift in the supply curve.
- Explain how indirect taxes and government subsidies affect the supply of a product.
- Distinguish between a shift in the supply curve and a movement along it.
Supply exam tips
Marking Points
- Identifying the specific factor, such as a change in production costs or new technology, causing a shift in the supply curve.
- Determining the direction of the supply curve shift resulting from indirect taxes, subsidies, or external shocks.
- Distinguishing between a movement along the supply curve (caused by own price changes) and a shift (caused by conditions of supply).
- Calculating or identifying the new equilibrium price and quantity following a specified shift in supply.
Examiner Tips
- 💡Remember that anything increasing the cost of production shifts the supply curve to the left, while cost reductions shift it to the right.
- 💡Carefully distinguish between indirect taxes (which shift supply left) and subsidies (which shift supply right) in multiple-choice scenarios.
- 💡Look out for external shocks, such as natural disasters, which typically reduce supply and shift the curve to the left.
Common Mistakes
- Shifting the demand curve when it is the costs faced by producers or other supply conditions that have changed.
- Treating a government subsidy as a factor that shifts supply to the left, rather than to the right.
- Confusing an indirect tax with a direct tax, or failing to recognise that an indirect tax increases costs of production and shifts supply left.