What is increase in supply? GROUP: B Short answer questions 4x5=20

Increase in supply refers to a situation where producers are willing to offer a greater quantity of a good or service for sale at the same price due to changes in factors other than the price of the good itself. This shift occurs when:

Increase in supply due to government subsidy: equilibrium quantity rises from Q₀ to Q₁ while price falls from P₀ to P₁.

Rightward shift of supply curve (S₁ → S₂) due to lower production costs: equilibrium quantity increases from Q₁ to Q₂ at a lower price P₂.

Production costs fall (e.g., cheaper raw materials, improved technology).
Government policies (e.g., subsidies, tax reductions) encourage production.
Favorable natural conditions (e.g., better weather for agriculture).
Expectations of future price declines prompt sellers to sell more now.

Graphically, an increase in supply is represented by a rightward shift of the entire supply curve, while a movement along the supply curve (due to price changes) is not considered an increase in supply. This results in a higher equilibrium quantity at the same or lower price.

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