What is the definition of supply in microeconomics?

In microeconomics, supply refers to the total amount of a specific good or service that is available to consumers. It is typically represented as a supply curve on a graph, showing the relationship between the price of the good and the quantity supplied by producers. The concept of supply is fundamental in understanding how markets function and how prices are determined.

How does the law of supply work in economics?

The law of supply states that, ceteris paribus (all other factors being equal), an increase in the price of a good or service will lead to an increase in the quantity supplied, and vice versa. This is because higher prices provide an incentive for producers to supply more of the good, as they can achieve higher revenue. Conversely, lower prices may discourage production, leading to a decrease in supply.

What factors can cause a shift in the supply curve?

Several factors can cause the supply curve to shift, including changes in production costs, technological advancements, taxes and subsidies, the number of sellers in the market, and expectations of future prices. For example, a decrease in production costs or an improvement in technology can shift the supply curve to the right, indicating an increase in supply at every price level.

How do supply and demand interact to determine market equilibrium?

Supply and demand interact in a market to determine the equilibrium price and quantity. The equilibrium is reached when the quantity supplied equals the quantity demanded. At this point, the market is said to be in balance, and there is no tendency for the price to change. If the market is not in equilibrium, forces will act to move it towards equilibrium, such as price adjustments.

What is the difference between a movement along the supply curve and a shift of the supply curve?

A movement along the supply curve occurs when there is a change in the quantity supplied due to a change in the price of the good, with all other factors remaining constant. In contrast, a shift of the supply curve occurs when there is a change in any other factor affecting supply, such as production costs or technology, leading to a new supply curve at every price level. A shift indicates a change in supply, while a movement along the curve indicates a change in quantity supplied.

Why is "Confusing 'change in supply' with 'change in quantity supplied'." a common mistake in Supply?

Why it happens: Loose terminology. How to avoid it: 'Change in quantity supplied' = movement along curve due to price change. 'Change in supply' = SHIFT of the curve.

Why is "Drawing supply shifting RIGHT after a tax." a common mistake in Supply?

Why it happens: Reversed direction. How to avoid it: Tax raises costs → supply shifts LEFT (less supplied at each price).

Why is "Drawing supply shifting LEFT after a subsidy." a common mistake in Supply?

Why it happens: Reversed direction. How to avoid it: Subsidy reduces costs → supply shifts RIGHT.

MicroeconomicsIB Economics SL

Supply

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Supply — IB Economics SL: the supply curve, law of supply, shifts vs movements, non-price determinants

Unit 2.2 of the 2022+ syllabus. The supply curve, law of supply, distinction between movement and shifts, and the major non-price determinants of supply.

What you’ll learn

Mapped to the IB DP Economics SL subject guide (2022 onwards (first assessment May 2024)).

2.2.1 — Define supply and state the law of supply.
2.2.2 — Distinguish movement along and shifts of the supply curve.
2.2.3 — Identify non-price determinants of supply.

The supply curve and law of supply

Upward-sloping.

Supply = quantity of a good producers are willing AND able to sell at each price during a time period.

Law of supply — as price rises, quantity supplied rises, ceteris paribus. Hence the upward-sloping supply curve.

Why upward-sloping?

Higher price covers higher marginal costs (firms can profitably produce more).
Higher price incentivises new firms to enter the market.
Existing firms work overtime or use spare capacity.

Willing AND able to sell.
Law of supply: P↑ → Qs↑.
Higher P justifies higher marginal cost output.

Shifts vs movements and non-price determinants

Determinants of supply.

Movement ALONG the supply curve = change in quantity supplied due to price change.

Shift of supply curve = change in supply at every price, caused by a NON-PRICE determinant:

Determinant	Effect
Costs of production ↑ (wages, materials, energy)	Supply ↓ (curve shifts LEFT)
Technology improves	Supply ↑ (curve shifts RIGHT)
Subsidies ↑	Supply ↑ (cost-reducing transfer)
Indirect taxes ↑	Supply ↓ (raises producer costs)
Future price expectations ↑	Supply now ↓ (hold for higher future price)
Number of producers ↑	Supply ↑ (more sellers in market)
Related goods in production (e.g. wheat vs barley on same land)	Substitute production: price of one ↑ → supply of OTHER ↓; joint products: price of one ↑ → supply of both ↑

Worked example. A government imposes a $1/unit tax on petrol producers:

This raises production costs.
Supply shifts LEFT.
Equilibrium price rises and quantity falls (covered in next subtopic).

Movement = price change.
Shift = non-price determinant.
Taxes ↑ → supply ↓; subsidies ↑ → supply ↑.

How it’s examined

Paper 1: 'Explain non-price determinants of supply.' Paper 2: identify which determinant caused a shift from a data response.

Sources: IB Diploma Programme Economics subject guide (IBO, 2020 — first assessment 2022). Last reviewed 2026-05-31.

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Step-by-step worked examples — Supply

Step-by-step solutions to past-paper-style questions on supply, written exactly the way a tutor would explain them at the board.

1Technology and supply
Building confidence• technology
Question
A new technology lowers the cost of producing solar panels. Explain the effect on the supply curve. (3 marks)
Step-by-step solution
1. Step 1
  Lower production costs make each unit more profitable at every price.
2. Step 2
  Producers willing to supply more at any given price.
3. Step 3
  Supply curve shifts RIGHT — increase in supply at all price levels.
Answer
Supply curve shifts right; more supplied at every price.
2Indirect tax shifts supply
Building confidence• tax
Question
A government imposes a $2 per pack tax on cigarettes (paid by producers). Show the effect on the supply curve and explain. (3 marks)
Step-by-step solution
1. Step 1
  Tax raises producer costs by $2 per pack.
2. Step 2
  At every price, producers willing to supply less; supply curve shifts LEFT (or vertically up by $2).
3. Step 3
  Equilibrium price rises (consumers pay more) and equilibrium quantity falls.
Answer
Supply shifts left (up by $2); price rises, quantity falls.
3Joint products in production
Stretch• joint products
Question
If the price of beef rises (raising cattle production), explain the likely effect on the supply of leather. (3 marks)
Step-by-step solution
1. Step 1
  Beef and leather are JOINT PRODUCTS — both come from cattle.
2. Step 2
  Higher beef price incentivises more cattle production.
3. Step 3
  More cattle → more leather as a byproduct → supply of leather shifts RIGHT.
Answer
Joint production: more cattle for beef → leather supply increases (shifts right).

Key Definitions and Keywords — Supply

Definitions to memorise and the exact keywords mark schemes credit for supply answers — sharpened from recent examiner reports for the 2026 IB DP Economics SL sitting.

Supply
Examiner keyword
Quantity of a good or service that producers are willing and able to sell at each price over a given period.
Law of supply
Examiner keyword
As price rises, quantity supplied rises, ceteris paribus (upward-sloping supply curve).
Subsidy
Examiner keyword
Government payment to producers to lower their costs and/or increase supply.

Common Mistakes and Misconceptions — Supply

The traps other students keep falling into on supply questions — taken from recent IB DP Economics SL examiner reports and mark schemes — and how to avoid them.

✕Confusing 'change in supply' with 'change in quantity supplied'.
Why it happens
Loose terminology.
How to avoid it
'Change in quantity supplied' = movement along curve due to price change. 'Change in supply' = SHIFT of the curve.
✕Drawing supply shifting RIGHT after a tax.
Why it happens
Reversed direction.
How to avoid it
Tax raises costs → supply shifts LEFT (less supplied at each price).
✕Drawing supply shifting LEFT after a subsidy.
Why it happens
Reversed direction.
How to avoid it
Subsidy reduces costs → supply shifts RIGHT.

Past paper style quiz

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Supply — frequently asked questions

The things students keep getting wrong in this sub-topic, answered.

Supply

Short Study Notes in the form of Slides

Short Study Notes — Supply

Detailed Notes

What you’ll learn

How it’s examined

1Technology and supply

2Indirect tax shifts supply

3Joint products in production

Supply

Law of supply

Subsidy

✕Confusing 'change in supply' with 'change in quantity supplied'.

✕Drawing supply shifting RIGHT after a tax.

✕Drawing supply shifting LEFT after a subsidy.

Past paper style quiz

Supply — frequently asked questions