2 What is the law of supply, and how do we illustrate it? A point on the supply curve shows the quantity supplied at a given price. A movement along the supply curve shows a change in the quantity supplied . The entire supply curve shows supply. A shift of the supply curve shows a change in supply.

Figure 3.6 illustrates and summarises these distinctions.

If the price of a good changes and other things remain the same, there is a change in the quantity supplied of the good. If the price of the good falls, the quantity supplied decreases and there is a movement down the supply curve S0. If the price of a good rises, the quantity supplied increases and there is a movement up the supply curve S0. When any other influence on selling plans changes, the supply curve shifts and there is a change in supply. If the supply curve is S0 and if production costs fall, supply increases and the supply curve shifts to the red supply curve S1. If production costs rise, supply decreases and the supply curve shifts to the red supply curve S2.