S 500 700 900 1,100 1,300 1,500 Did you know? In Boston, in the 19th century, lobsters were used as food for prisoners.
Today, they are seen as a luxury item normally only available in expensive restaurants. Why is this case? The reason is explained by simple supply and demand. In the 19th century Boston Harbour was full of lobsters and the supply was so large that the price was as low as that for apples. Today, lobsters are much rarer, which has reduced supply and pushed up the price.
Movements along a supply curve
Changes in the demand or price of a product will cause movement along the supply curve.
A rise in the price of a product from P1 to P2 will encourage an increase in supply from Q1 to Q2 as suppliers try to earn more profits and new firms are tempted to enter the market. Similarly, an increase in demand from customers from Q1 to Q2 will encourage suppliers to increase their prices to earn more profits.
Price S
P2 P1
0 348 Q1 Q2
Quantity Supplied
Q
→ Upward sloping supply curve As the market price increases, the quantity that sellers are willing to supply rises. This causes movement along the supply curve and gives us the upward slope of the curve. Businesses are prepared to supply more goods at higher prices than at lower prices.
