Transcript Chapter 3: Elasticity of Demand

Chapter 4: Supply
AGENDA Mon 2/6 & Tues 2/7
•QOD #10: Calvin’s Dilemma
•Review HW (pg 76 & pg 84)
•Beef, Headlines & Elasticity Worksheets
•Demand Quiz
•Basics of Supply
•Graphing Practice
•HW: Looking for S&D Project P1
•
Pg 94 #3-7
QOD #10: Calvin’s Dilemma
A higher price of peanut butter decreases
the amount sold but it does not decrease
the demand of peanut butter.
Explain how this is possible.
Draw a graph to support your explanation.
Chapter 4: Section 1 - Supply
supply refers to the willingness and ability
of sellers to produce and offer to sell a
good or service.


willingness means the desire to produce and
sell the good
ability to produce and sell means the person
is capable and of producing and selling the
good
The Law of Supply
law of supply holds that as the price of a good
increases, the quantity supplied of the good
also increases

the same holds for decreases
they have a direct relationship because they
move in the same direction


both go up together
both go down together
The Law of Supply
If P  the Qs 
If P  then Qs 
The Difference between Supply and
Quantity Supplied
Quantity supplied refers to the number of units
of a good produced and offered for sale at a
specific price

ex: hamburger example on page 91
A Supply Schedule
a supply schedule is a numerical chart that
illustrates the law of supply
see Exhibit 4-1 (a) on page 93
 Question - What is the relationship
between price and quantity supplied?
A Supply Curve
a supply curve is a graphic representation
illustrating the law of supply

it is formed by plotting supply schedule data
a supply curve is a line that slopes upward
from left to right and shows the amount of
a good sellers are willing and able to sell
at various prices
A Vertical Supply Curve
When the law of supply does not hold:

on goods that can no longer be produced
exhibit 4.2 (a)
ex: Stradivarius violins

when there is no time to produce more units of a
good
exhibit 4.2 (b)
ex: sold out theater