Individual supply is the supply of an individual producer at each price. Market supply is the sum of the individual supply schedules of all producers in the industry

2. Individual and Market Supply
Supply of an
individual producer
at each price
Individual
supply Sum of the
individual supply
schedules of all
producers in the
industry
Market
supply

3. Market Supply
• Supply is the quantity of a
good or service that a
producer is willing and able
to supply onto the market at
a given price in a given time
period.
• The basic law of supply is
that as the price of a product
rises, so businesses expand
supply to the market.
• A supply curve shows a
relationship between market
price and how much a firm is
willing and able to sell.
MassProduction
AirlineTravelProductionLines
Key to understanding the basics of market
supply is to be aware of the importance of
the profit motive. Suppliers will be looking
to get the best price for their product.

4. Supply Curve – Higher Prices and Supply Expansion
Price of
Coffee
Quantity supplied
Supply of coffee
P1
Q1
P2
Q2
P3
Q3
A rise in the market price brings about an expansion of supply
– producers are responding to the profit motive
A movement along the
supply curve is caused
solely by a change in
price, all other factors
remaining constant

5. Market Supply
Market supply is total supply brought to the market by producers at
each price. To calculate, sum the individual supply schedules
Price (£)
Firm A’s
supply +
Firm B’s
supply +
Firm C’s
supply +
= Market
Supply
10 30 0 5 35
20 45 10 15 70
30 65 20 40 125
40 100 30 70 200
Supply is not necessarily the amount that is actually sold, since, if
consumers do not wish to buy the product, it will remain unsold

6. Causes of Shifts in the Market Supply Curve
1. Changes in the unit costs of production
– Lower unit costs mean that a business can supply more at each
price – for example higher productivity
– Higher unit costs cause an inward shift of supply e.g. a rise in wage
rates or an increase in energy prices / other raw materials
2. A fall (depreciation) in the exchange rate causes an increase in prices
of imported components and raw materials –
3. Advances in production technologies – outward shift of supply
4. The entry of new producers into the market – outward shift
5. Favourable weather conditions e.g. for agricultural products
6. Taxes, subsidies and government regulations
– Indirect taxes cause an inward shift of supply
– Subsidies cause an outward shift of supply
– Regulations increase costs – causing an inward shift of supply

7. Craft beers are produced by small, independent brewers using traditional methods. Popular
styles such as pale ale can use six times as much hops as typical lagers.

10. The Growing Market Supply of Craft Beers in the UK
1,721,291
1,885,053
2,234,489
2,361,138
2,584,192
2,992,747
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
2009 2010 2011 2012 2013 2014*
Productionvolumeinhectolitres(hl)

11. Individual and Market Supply
Supply of an
individual producer
at each price
Individual
supply Sum of the
individual supply
schedules of all
producers in the
industry
Market
supply