What determines how much of a good firms are willing to sell?
The law of supply, why the supply curve slopes upwards, the difference between a movement along and a shift of supply, and the factors that shift supply.
A focused answer for AQA GCSE Economics on the law of supply, the upward-sloping supply curve, movements versus shifts, and the non-price factors that shift supply.
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What this dot point is asking
AQA wants you to state the law of supply, explain why the supply curve slopes upwards, distinguish a movement along the curve from a shift of the whole curve, and list the non-price factors that shift supply. Supply pairs with demand to determine market price, so the diagram skills here feed directly into price determination questions.
The law of supply
The supply curve slopes upwards from left to right for two reasons. First, a higher price makes each unit more profitable, so existing firms expand output and new firms enter. Second, producing extra units usually pushes up costs (overtime pay, less efficient machines), so firms will only supply that extra output if the price is high enough to cover those rising costs.
Movements along the supply curve
A change in the price of the good itself causes a movement along the curve:
- A rise in price causes an extension of supply (quantity supplied rises).
- A fall in price causes a contraction of supply (quantity supplied falls).
Shifts of the supply curve
A change in a non-price factor shifts the whole curve. Supply shifts right (an increase) or left (a decrease) for reasons including:
- Costs of production: lower wages, rent or raw material costs raise supply.
- Technology: better technology lowers costs and raises supply.
- Indirect taxes: a tax on the good raises costs and shifts supply left.
- Subsidies: a subsidy to producers lowers costs and shifts supply right.
- Number of firms: more firms in the market raise total supply.
- Weather and shocks: for farming, good weather raises supply while drought reduces it.
- Productivity: higher output per worker raises supply at every price.
Why the direction matters
Worked diagram example
Try this
Q1. State the law of supply. [2 marks]
- Cue. As price rises, quantity supplied rises, other things being equal.
Q2. Explain one factor that would shift the supply curve for wheat to the left. [3 marks]
- Cue. A poor harvest caused by bad weather reduces the quantity firms can supply at every price, shifting the curve left.
Exam-style practice questions
Practice questions written in the style of AQA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
AQA 20186 marksExplain how a fall in the cost of raw materials could affect the supply of a good.Show worked answer →
A fall in the cost of raw materials is a fall in a firm's costs of production. At every price, producing the good is now more profitable, so firms are willing and able to supply more.
This shifts the whole supply curve to the right (an increase in supply). It is a shift, not a movement along the curve, because the cause is a non-price factor rather than a change in the good's own price.
At the original price there would now be excess supply, which tends to push the market price down towards a new, lower equilibrium with a higher quantity traded. A 6 mark answer names the shift direction, explains the link to lower costs, and traces the effect on price and quantity.
AQA 20219 marksDiscuss the likely effects on the supply of solar panels of an improvement in production technology and the introduction of a government subsidy to producers.Show worked answer →
Both changes are non-price factors, so both shift the supply curve.
Better technology lowers unit costs and raises output per worker, shifting supply to the right. A producer subsidy is a payment to firms that cuts their effective costs, also shifting supply to the right, so the two effects reinforce each other.
The combined rightward shift lowers the equilibrium price and raises the quantity traded, which should make solar panels more affordable. A strong answer develops both chains, notes the effects reinforce, and judges that the size depends on how large the subsidy is and whether the technology gain is one-off or ongoing.
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Sources & how we know this
- AQA GCSE Economics (8136) specification — AQA (2017)