Transcript Chapter 4 Supply

SECTION 1
Nature of Supply
Essential Question:
 Explain why supply is considered to be
“producer” controlled, describe the
relationship between supply and price
according to the law of supply, explain the
differences between elastic and inelastic
supply
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SECTION 1
Nature of Supply
How is supply different:
 Supply is mostly controlled by producers.
 Producers can choose to increase or
decrease the quantity of goods or services
that they produce.
 They do this based on their ability to make
profit or the money left over after
subtracting costs from revenue.
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SECTION 1
Nature of Supply
Difference between supply and
quantity supplied:
 Supply—refers to whether or not producers
are willing and able to produce. The price of
the product must allow them to make profit.
As the price increases, so does the supply
 quantity supplied—the specific amount of a
good or service that producers are willing
and able to supply at each specific price
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SECTION 1
Nature of Supply
Law of supply:
 Quantity supplied and price have a mirror
relationship: Whenever price increases or
decreases, the supply does as well.
 When price of a good or service increases,
suppliers are willing to produce more; as
price per good or service decreases,
suppliers will produce less.
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SECTION 1
Nature of Supply
What supply schedules and supply
curves illustrate:
 Supply schedule—A table showing the
specific quantity produced at each and every
price.
 Supply curve- The same data as a Supply
Schedule shown in Graph form
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SECTION 1
Nature of Supply
Supply Elasticity.
Just as with demand, this is the measure of
how much quantity supplied changes
when the price changes.
If price changes a little but Q.S. changes a lot,
there is elastic supply
If price changes a lot but Q.S. changes a little,
there is inelastic supply.
SECTION 1
Nature of Supply
Elastic vs. Inelastic Supply
 Products with Elastic
Supply
 Are made quickly
 Are made
inexpensively
 Use only a few readily
available resources
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 Products with
Inelastic Supply
 Take time to make
 Are expensive to
produce
 Use resources that are
not readily available
SECTION 1
Nature of Supply
Perfectly Inelastic Supply
When a change in price causes no
change in supply.
This is because there are no resources
available to produce additional supply