# How Does Supply Affect Total Revenue?

The total revenue a company earns is the amount of product it sells times the price of that product. That price and quantity depend on the company's supply curve, which illustrates a variety of combinations of prices and quantities that the company can choose for their product.

## Supply and Demand

1. The supply curve charts a variety of combinations of prices and quantities at which a business is willing to sell its goods. The company is willing to sell more at higher prices, so the curve usually slopes upward. Customers have an inverse relationship with price -- they want to pay less for more goods, so their demand curve slopes downward. When the two curves intersect, that represents that customers and sellers have agreed on a price and quantity sold for the product that satisfies both sides.

## Total Revenue

1. That price and quantity are what make up total revenue. The total revenue figure does not take costs into account, merely income from selling goods at the equilibrium price and quantity. Total revenue assumes that all products are sold at the same price. As a figure, total revenue in economics is not the same as accounting revenue, but it can provide a helpful illustration of how much a business brings in and has uses in showing how different changes in the environment will affect a business.

## Changes in Supply

1. The supply curve moves when the cost structure of a business changes. For example, if a new technology makes production cheaper, the supply curve moves to reflect that the business can produce more goods for the same price. This will increase total revenue -- the company can sell more of its product for the same price as before. If costs increase, for example, due to tighter regulations, then the business wants a higher price for its goods to make up for the higher costs.

## Elasticity

1. In economics, elasticity is a measure of how sensitive to change a particular variable is. For example, if a company's supply curve is highly elastic with respect to price, then small changes in price due to factors outside the company's control can make big differences in equilibrium price and quantity, and, therefore, in total revenue. Knowing the elasticity of its supply lets a business know how vulnerable it is to sudden shocks and changes in the business environment.