This is an exercise to test understanding of the conditions of supply in markets. You can download the resource by clicking below.

Supply is the quantity of a product that a producer is willing and able to supply / sell onto a market at a given price in a given time period

The law of supply - a greater quantity of a good or service will be supplied at a higher price. In part this is due to the profit incentive. For example, if you are a business extracting crude oil, you stand to make a higher profit for every barrel supplied if the market price is $100 compared to a price of $60.

A change in market price of the product itself will cause a movement along the market supply curve

But changes in other conditions of supply (i.e. non-price factors) will bring about a shift in the supply curve. Most of these supply conditions relate to the costs of production facing a business. But supply can also be affected by changes in the prices of other goods and services, price expectations, shifts in technology, supply-shocks that disrupt normal supply and also the impact of government regulations on producers.

In the exercise below identify whether the change in the market will bring about either a movement along the supply curve or a shift in the supply curve at each price. And then decide whether you expect to see a contraction/expansion of supply (for a movement along) or a fall/increase in supply (for a shift).

Resource download
Market_Supply_Exercise.pdf