Supply — common mistakes

When a question gives a supply schedule (a table), plot price on the vertical axis and quantity on the horizontal axis, and label the curve S. Marks are lost for unlabelled axes more often than for a wobbly line.

Before drawing, ask: 'Did the price of this product change, or did something else change?' Own price → move along. Anything else → shift. Then state the direction and the effect on equilibrium price and quantity.

Because a higher price makes producing extra units profitable: it covers the rising cost of producing more and attracts new producers. At a low price only the lowest-cost output is worth supplying.

No. A rise in demand raises the price, and producers respond by moving along the existing supply curve — an extension of supply. Only a change in a condition of supply shifts the curve.

A subsidy lowers producers' costs and shifts supply to the right, lowering price and raising quantity. An indirect tax raises costs and shifts supply to the left, raising price and lowering quantity.