The Law of Supply
Explain supply, the supply curve and market equilibrium.
Supply is the quantity producers are willing to sell at each price.
- State the law of supply.
- Name factors that shift supply.
- Find equilibrium price and quantity.
The Law
Other things being equal, as price rises, quantity supplied rises. This gives an upward-sloping supply curve.
Shift Factors
- Cost of production — higher costs reduce supply.
- Technology — better technology increases supply.
- Taxes and subsidies.
- Weather and natural conditions.
- Number of producers in the market.
Market Equilibrium
Equilibrium is where the demand and supply curves cross. At that price, quantity demanded equals quantity supplied. Above it, there is a surplus; below it, a shortage.
At ₦500, buyers want 100 bags and sellers offer 100 bags — equilibrium.
At ₦700, sellers offer 150 bags but buyers want 60 — surplus.
At ₦300, buyers want 140 bags but sellers offer 50 — shortage.
Practice
- State the law of supply.
- Explain what happens to price when demand exceeds supply.
- Name two factors that could reduce the supply of tomatoes.
Recap
Supply rises with price. Equilibrium balances demand and supply; surpluses and shortages move prices.
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Demand, Supply and Price
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