HOW MARKET S 1 (SUPPLY) WEEK 7

WEEK 6
DATE:
YEAR 10
WEEK 7: DATE:
TOPIC: HOW MARKET WORKS 1 ( SUPPLY).
IGCSE Economics 0445 for Year 10 Students

SUPPLY
Objectives:
By the end of this lesson, students should be able to:
Lesson Objectives
By the end of this lesson, students will be able to:
1. Define supply and distinguish it from production.
2. Explain the relationship between supply and price.
3. Differentiate between individual supply and market supply.
4. Describe factors that cause shifts in the supply curve.
Keywords: Factors of Production, Land, Labor, Capital, Enterprise
How Markets Work 1: SUPPLY
1. Definition of Supply
• Supply is defined as the willingness and ability of producers to offer goods or
services for sale at different prices.

• Key Point: Don’t confuse supply with production!
o Production is about making the goods.
o Supply is about making those goods available for sale, which can depend on
current prices and market demand.

o Example: A factory may produce 1,000 units of a product but only supply 800
units to the market, keeping 200 in stock for future sale.
2. Supply and Price

• Direct Relationship: Supply generally increases when prices rise.
o When prices are high, companies are motivated to sell more since they can
earn higher profits.

o Example: If the price of a product goes up, a company will likely increase its
supply to maximize profit.

Why this happens:
1. Higher prices cover production costs more easily.
2. Companies make higher profits, encouraging them to produce and supply more.
3. Individual and Market Supply

• Individual Supply: This is the amount a single firm or business is willing to supply at
each price.
• Market Supply: This is the combined supply from all firms in an industry at each price
level.
o Market supply is the total of individual supplies.
A Supply Schedule and Supply Curve

• Supply Schedule: A table showing how much of a product is supplied at various
prices.
o Example:
Price ($) Quantity Supplied

50 6,000 tickets
45 5,000 tickets
40 4,300 tickets
a supply schedule for train tickets from Station X to Station Y.
• Supply Curve: A graph that shows the relationship between price and quantity
supplied.
o Supply curves usually slope upwards, indicating that higher prices lead to a
larger quantity supplied.

• , a supply curve can be plotted as shown BELOW
4. Changes in Supply vs. Movements Along the Supply Curve

• Movement Along the Supply Curve (extension or contraction of supply):
Extension in supply: a rise in the quantity supplied caused by a rise in the price of the
product itself.
Contraction in supply: a fall in the quantity supplied caused by a fall in the price of the
product itself.
o Caused by a change in price of the product itself.
o Higher prices lead to expansion (more supply), while lower prices cause
contraction (less supply).

Shift in the Supply Curve:
• ft. An increase in supply is illustrated by a shift to the right as shown in GRAPH
BELOW
An increase in supply
•
o Happens when other factors change (not the product's price).
o A rightward shift means an increase in supply.
In contrast, a decrease in supply results in a movement of the supply curve to the left, as
shown in the graph below.
Now whatever the price, less will be supplied.

o A leftward shift means a decrease in supply.
Conditions of Supply: What Shifts the Supply Curve?

Several factors can shift the supply curve to the right (increase supply) or left
(decrease supply):
1. Changes in Production Costs: Lower costs increase supply, while higher costs
decrease supply.
2. Technology Improvements: Better technology often reduces production costs and
increases supply.
3. Taxes and Subsidies:
o Taxes on goods reduce supply.
o Subsidies (financial help from the government) increase supply.
4. Weather Conditions: Good weather increases agricultural supply, while bad weather
decreases it.
5. Health of Livestock and Crops: Diseases can reduce supply.
6. Price of Other Products: If a company can make more profit on another product, they
might produce less of the current one.
7. Natural Disasters or Wars: These events usually reduce supply due to damage and
disruptions.
Summary
• Supply is about producers' willingness and ability to sell goods.
• It has a direct relationship with price: higher prices lead to an increase in supply.
• Supply can change based on factors like production costs, technology, and taxes,
which shift the supply curve.
Multiple Choice Questions

1. Define supply in your own words.
2. Explain why the supply curve usually slopes upwards.
3. Describe one factor that could cause an increase in the supply of rice.
4. How does a subsidy affect supply?

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WEEK 6

IGCSE Economics 0445 for Year 10 Students

Keywords: Factors of Production, Land, Labor, Capital, Enterprise

How Markets Work 1: SUPPLY

services for sale at different prices.

o Production is about making the goods.

current prices and market demand.

2. Supply and Price

earn higher profits.

supply to maximize profit.

3. Individual and Market Supply

A Supply Schedule and Supply Curve

Price ($) Quantity Supplied

larger quantity supplied.

4. Changes in Supply vs. Movements Along the Supply Curve

contraction (less supply).

Now whatever the price, less will be supplied.

Conditions of Supply: What Shifts the Supply Curve?

o Subsidies (financial help from the government) increase supply.

which shift the supply curve.

Multiple Choice Questions

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