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Decrease in Supply

Definition

A decrease in supply refers to an event or factor that causes producers to offer less of a product for sale at every possible price level.

Analogy

Picture yourself running out of ingredients while making cookies. If you suddenly realize you don't have enough flour, sugar, and chocolate chips, you will have to decrease the supply of cookies you can make.

Related terms

Shift in Supply Curve: A shift in the supply curve occurs when a change in factors other than price causes producers to offer a different quantity at every possible price.

Input Costs: Input costs are the expenses that producers incur to produce goods or services. Examples include raw materials, labor wages, and energy costs.

Subsidy: A subsidy is financial assistance given by the government to producers to encourage production of a particular good or service.

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AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.