Supply

Key terms:

Supply - the quantity of goods and services producers are willing and able to produce at a
given time, at a given price, ceteris paribus.

1. Beginning activity

Start by watching the following short video which explains the concept, before completing
the questions which follow:

Question:

You are the production manager of Shell oil company and it is your job to decide on the level
of production that you would like the business to aim for. Based on the video that you have
just watched outline the possible factors that may influence your decision?

Activity 2

Imagine that you set up a business selling cup cakes in your current school. How many cakes
would you be willing and able to supply at the following prices?

$1, $1.5, $2, $2.5, $3, $3.5, $4

Plot this on a diagram.

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InThinking www.thinkib.net/Economics 1
Activity 3

(a) The diagram to the right illustrates a

supply curve for a good or service.
Explain why the supply curve slopes
upwards from left to right.

(b) Why does the supply for a product

require producers to be willing and able
to produce the product at each given
price?

Activity 4

Based on information from the short video, illustrate the impact on the market for milk under the
following circumstances:

1. The market for milk after the government places a sales tax on animal feed?

Equilibrium

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 2. The market for milk following a successful advertising campaign by diary farmers?

3. The market for milk if demand for chocolate and other diary products rises?

4. The market for milk if fuel prices fall?

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InThinking www.thinkib.net/Economics 3
 5. The market for milk following a rise in minimum wage in the country?

6. The market for milk following a rise in wage levels?

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Activity 5: Link to the assessment

Examination questions on supply can also be found in each of the three exam papers, with
candidates required to apply the theory of supply to a given situation. Examples of typical
questions include:

Paper 1 (part A)

Explain using a relevant diagram why an increase in the price of a good or service will lead to
an increase in the quantity supplied but an increase in supply leads to a fall in selling price.

Paper three (HL only)

On paper three candidates may be asked to illustrate the impact of a change in market
conditions on the supply for a good or service, e.g.

i. Illustrate the impact on the market for a product following a government subsidy placed on
the good or service?

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InThinking www.thinkib.net/Economics 5