Q.State the Law of Supply. Distinguish between a movement along a supply curve and a shift of the supply curve.

The Law of Supply links a good's own price to the quantity offered, while other determinants held behind it explain shifts of the whole curve.

Law of Supply. Other things remaining constant, the quantity supplied of a good varies directly with its own price: quantity supplied rises when price rises and falls when price falls. This direct relationship gives an upward-sloping supply curve, because a higher price raises profit per unit, justifies bringing higher-cost output to market and attracts new firms.

Movement along the supply curve occurs when only the good's own price changes, other determinants unchanged. A rise in own price causes an extension of supply (upward movement along the curve); a fall causes a contraction (downward movement). The curve itself does not move.

Shift of the supply curve occurs when a determinant other than own price changes — input/factor prices, technology, taxes and subsidies, prices of related goods the firm could produce, the number of firms, or price expectations. A favourable change causes an increase in supply (rightward shift, more supplied at each price); an unfavourable change causes a decrease (leftward shift).

Confusing supply with stock, or quantity supplied with supply. Calling a rightward shift an 'extension' — extension is a movement along the curve, not a shift. Forgetting the ceteris paribus condition that separates the two cases.