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Business_A-level_Edexcel

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  1. 1-marketing-and-people

    1-1-meeting-customer-needs
    3 主题
  2. 1-2-market
    5 主题
  3. 1-3-marketing-mix-and-strategy
    5 主题
  4. 1-4-managing-people
    5 主题
  5. 1-5-entrepreneurs-and-leaders
    6 主题
  6. 2-managing-business-activities
    2-1-raising-finance
    4 主题
  7. 2-2-financial-planning
    4 主题
  8. 2-3-managing-finance
    3 主题
  9. 2-4-resource-management
    4 主题
  10. 2-5-external-influences
    3 主题
  11. 3-business-decisions-and-strategy
    3-1-business-objectives-and-strategy
    4 主题
  12. 3-2-business-growth
    4 主题
  13. 3-3-decision-making-techniques
    4 主题
  14. 3-4-influences-on-business-decisions
    4 主题
  15. 3-5-assessing-competitiveness
    3 主题
  16. 3-6-managing-change
    3 主题
  17. 4-global-business
    4-1-globalisation
    5 主题
  18. 4-2-global-markets-and-business-expansion
    5 主题
  19. 4-3-global-marketing
    3 主题
  20. 4-4-global-industries-and-multinational-corporations
    3 主题
  21. 5-exam-technique
    5-1-the-exam-papers
    4 主题
  22. 5-2-business-studies-skills
    1 主题
  23. 5-3-structuring-your-responses
    5 主题
  24. 6-pre-release-preparation
    2025-pre-release-music-industry
    9 主题
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An introduction to supply

  • Supply is the number of goods/services businesses are willing to sell at a given price in a specific time period

  • There is a direct relationship between supply and price 

    • As the price increases, the quantity supplied increases

    • As the price decreases, the quantity supplied decreases

    • At higher prices, businesses are incentivised to supply more of the product

    • Hence, the supply curve slopes upwards from left to right

A simple supply curve

Graph showing supply curve S, with points A, B and C. A-B indicates an extension in the quantity supplied. A-C indicates a contraction. The axes are labelled "Price (£)" and "Quantity".
A supply curve showing how a change in price will lead to a change in the quantity supplied (QS)

Diagram analysis

  • An increase in price from £7 to £9 leads to a move up the supply curve, from point A to point B

    • Due to the increase in price, the quantity supplied (QS) has increased from 10 to 14 units

  • A decrease in price from £10 to £7 leads to a movement down the supply curve, from point A to point C

    • Due to the decrease in price, the QS has decreased from 10 to 7 units

Examiner Tips and Tricks

When writing about a movement along the supply curve, we use the term “quantity supplied“.

Factors leading to a change in supply

  • A change in price causes a movement along the supply curve

  • A change in any other factor affecting supply will shift the entire supply curve to the left or right

    • These are called non-price factors affecting supply 

Non-price factors affecting supply

Diagram showing non-price factors affecting supply: changes in cost, new technology, indirect taxes, government subsidies and external shocks.
Non-price factors include changes in the costs of production, external shocks and indirect taxes

  • For example, if a firm’s cost of production increases due to an increase in the price of a key resource, then there will be a decrease in supply, as the firm can now only afford to produce fewer products

  • This causes a shift in supply from S to S1. The price remains unchanged at £7, but the supply has decreased from 10 to 2 units

Changes in non-price factors

Graph showing supply curves shifting right: S1 at price £7 and quantity 2, S at 10, and S2 at 20. Axes are labelled "Price (£)" and "Quantity".
A diagram showing how a change in any non-price factor of supply will shift the entire supply curve left or right

Diagram analysis

  • The initial supply curve is seen at S

    • At a price of £7, 10 units are supplied

  • If the price remains constant at £7 but supply decreases due to one of the non-price factors of supply (e.g. workers’ wages increase), the entire supply curve will shift to the left, from S to S1

    • Supply has decreased from 10 to 2 units

  • If the price remains constant at £7 but supply increases due to one of the non-price factors of supply (e.g. cost of production falls), the entire supply curve will shift to the right, from S to S2

    • Supply has increased from 10 to 20 units

Non-price factors affecting supply

Non-price factor

Explanation

Examples

Change in the costs of production

  • An increase in the cost of production makes it more expensive to produce each unit, so a business will be able to produce fewer units at a given price

  • For a clothing manufacturer, an increase in energy and labour costs will increase the cost of making each item

  • This shifts the supply curve for clothing to the left

New technology 

  • Advances in technology will lead to lower costs of production, and businesses will be able to produce more units at a given price

  • Robots have replaced many workers in car factories, increasing productivity

  • This shifts the supply curve for cars to the right

Indirect taxes

  • The government increases indirect taxes on businesses, which causes an increase in the cost of production, as firms have to pay extra costs

  • The rate of VAT increased from 17.5% to 20% in the UK in 2011

  • This shifted the supply curves for all businesses to the left

Government subsidies

  • A producer subsidy given by the government to businesses will reduce the cost of production

  • A subsidy to the largest battery producer in the UK lowers the cost of production for electric car manufacturers

  • This has shifted the supply curve for electric vehicles to the right

External shocks

  • An unexpected event can change supply

  • The outbreak of Covid-19 caused many hotels, bars and restaurants to close down

  • This shifted the supply curves for hotels, bars and restaurants to the left

Examiner Tips and Tricks

Remember, a change in any factor that leads to less supply will shift the supply curve to the left, but a change in any factor that leads to more supply will shift the supply curve to the right.

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