Read supply curves and explain supply changes
Distinguish movements along supply from shifts caused by production costs, technology and other determinants.
Section 2.3 · Supply
Cambridge IGCSE Economics 0455 / IGCSE (9–1) Economics 0987, 2027–2029 Version 1. Apply each model to the stated evidence and qualify conclusions where effects depend on context. Practice is original and self-checked; it is not a Cambridge paper, mark scheme or official grade.
Before you begin
- No prior economics study is assumed. Read the scenario for the decision-maker, the market or economy involved, the time period and the evidence supplied.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
If a subsidy lowers firms' unit costs, what may happen to supply?
What you will learn
- Define and aggregate supply
- Distinguish a movement from a shift
- Explain common supply determinants
Supply is planned willingness to sell
Supply is the quantity producers are willing and able to sell at different prices over a period. Market supply adds firms' quantities at each price.
A higher own price often makes additional production worthwhile, causing an extension along the existing supply curve, other things equal.
Production conditions shift supply
Costs of inputs, productivity, technology, taxes, subsidies, weather and the number of firms can change supply at each own price. Lower unit costs or improved technology may shift supply right; a new per-unit cost may shift it left.
State whether the determinant changes costs or capacity and hold other influences constant. An observed price rise alone does not prove supply fell; demand may have changed too.
Pause and explain
A rise in the product's own price leads firms to offer more, other things equal. What is this?
Worked example
A new oven lets bakeries produce more bread at every price. Explain the supply effect.
Show the worked solution
- The technology changes production capacity, not the bread price itself.
- More can be supplied at each price.
- The market supply curve shifts right.
Answer Improved technology may increase market supply, shifting the curve right. The size depends on adoption costs and whether the ovens are suitable for each bakery.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A per-unit tax is introduced on a manufactured drink. Describe the likely supply curve change and why.
Give me a hint
Trace the tax to the cost of supplying each unit.
Compare my reasoning
- The tax raises the cost of each unit, other things equal.
- Firms are willing to supply less at each price.
- Supply shifts left.
The tax increases unit costs and may shift supply left. The final market price and quantity depend on demand and the extent to which firms can absorb the tax.
Look for these in your work
- Cost mechanism stated
- Direction correct
- Market outcome qualified
A good's price rises while input costs do not change. Explain the change in supply terminology.
Give me a hint
Ask whether the change is the good's own price or another determinant.
Compare my reasoning
- The good's own price has changed.
- Firms move to a larger quantity supplied on the same curve.
- This is an extension, not a supply shift.
It is an extension in quantity supplied along the existing curve. A shift would require a change in a determinant such as costs, technology or the number of firms.
Look for these in your work
- Own price identified
- Movement named
- Shift distinguished
A drought reduces the harvest, while a new irrigation system partly offsets the loss. Explain the likely market supply result.
Give me a hint
Combine both effects and avoid assuming one dominates without evidence.
Compare my reasoning
- The drought can reduce output capacity.
- Irrigation can reduce vulnerability or restore some capacity.
- The net supply shift depends on the size and timing of each effect.
The drought tends to shift supply left, while irrigation tends to offset that reduction. The net change depends on the harvest loss and how effective the system is.
Look for these in your work
- Both determinants explained
- Directions correct
- Net effect qualified
Common mistakes
- Calling a price rise a shift in supply
- Assuming lower costs always reduce market price by the same amount
- Ignoring the number of firms when aggregating market supply
What can you explain now?
What is market supply?
Compare with the explanation
The sum of firms' quantities offered at each price
Market supply aggregates individual supply schedules.
After trying it yourself, choose your next review. This is your self-assessment.
Your review choice appears on Today. Sign in to sync it across devices.
Make it stick
What is market supply?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.