In the goods market, supply is the amount of a product per unit of time that producers are willing to sell at various given prices when all other factors are held constant(ceteris paribus). In the labor market, the supply of labor is the amount of time per week, month, or year that individuals are willing to spend working, as a function of the wage rate. In the financial markets, the money supply is the amount of highly liquid assets available in the money market, which is either determined or influenced by a country's monetary authority.
Innumerable factors and circumstances could affect a seller's willingness or ability to produce and sell a good. Some of the more common factors are:
Good's own price: The basic supply relationship is between the price of a good and the quantity supplied. Although there is no "Law of Supply", generally, the relationship is positive, meaning that an increase in price will induce an increase in the quantity supplied.
Prices of related goods: For purposes of supply analysis related goods refer to goods from which inputs are derived to be used in the production of the primary good. For example, Spam is made from pork shoulders and ham. Both are derived from pigs. Therefore, pigs would be considered a related good to Spam. In this case the relationship would be negative or inverse. If the price of pigs goes up the supply of Spam would decrease (supply curve shifts left) because the cost of production would have increased. A related good may also be a good that can be produced with the firm's existing factors of production. For example, suppose that a firm produces leather belts, and that the firm's managers learn that leather pouches for smartphones are more profitable than belts. The firm might reduce its production of belts and begin production of cell phone pouches based on this information. Finally, a change in the price of a joint product will affect supply. For example, beef products and leather are joint products. If a company runs both a beef processing operation and a tannery an increase in the price of steaks would mean that more cattle are processed which would increase the supply of leather.
Conditions of production: The most significant factor here is the state of technology. If there is a technological advancement in one good's production, the supply increases. Other variables may also affect production conditions. For instance, for agricultural goods, weather is crucial for it may affect the production outputs.
Movements along the curve occur only if there is a change in quantity supplied caused by a change in the good's own price. A shift in the supply curve, referred to as a change in supply, occurs only if a non-price determinant of supply changes. For example, if the price of an ingredient used to produce the good, a related good, were to increase, the supply curve would shift left.
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Good's own price: The basic supply relationship is between the price of a good and the quantity supplied. Although there is no "Law of Supply", generally, the relationship is positive, meaning that an increase in price will induce an increase in the quantity supplied.
