Supply is the quantity of a good or service that producers are willing and able to offer at various prices. Higher prices usually bring more supply. Lower prices bring less. A farmer who can sell wheat at $10 a bushel plants more acreage than one facing $4 a bushel. That relationship, called the law of supply, is the mirror image of demand.

Supply depends on costs. If raw materials, labor, or energy get more expensive, producers need higher prices to make the same quantity. If technology improves, costs fall and supply increases at every price. Taxes raise costs and reduce supply. Subsidies lower costs and increase it. Weather, war, and trade policy can shift supply curves overnight.

Supply is not always flexible. In the short run, a factory can only produce so much. Adding capacity takes time and money. Oil fields cannot be turned on and off like a faucet. This inelasticity explains why prices spike when demand surges and supply cannot keep up. Over the long run, supply adjusts. New mines open, new factories are built, and new workers are trained. But in the short run, markets can be painfully tight.

Supply shifters

• Input costs
• Technology
• Taxes and subsidies
• Number of sellers
• Expectations of future prices