Transcript Chapter 5.1 Notes

Chapter 5.1: Supply
Objectives
1. Explain the law of supply.
2. Interpret a supply schedule and a supply
graph.
3. Examine the relationship between
elasticity of supply and time.
Chapter 5, Section 1
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Slide 2
Bell Ringer
• Divide into groups of 3…instructions to
follow:
– Each group list and number the brand names
of as many bottled beverages as you can in
four minutes (non-alcoholic)`
• Mt Dew, Vitamin Water, Sprite etc etc
– Once four minutes is up, decide how to divide
your list into categories
• Example – Type of beverage, price, type of
container, marketed as sports/health/thirst
quenching.
Chapter 5, Section 1
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Slide 3
Bell Ringer
• How many did you list?
• How did you categorize?
• Why are there so many varieties in each
category??
• Why is there more than one type of bottled
water!!??
• PEOPLE ARE WILLING
TO PAY FOR IT!!
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Slide 4
Understanding Supply
Suppose you own a bakery. Even after you
raised prices, you can’t keep products on
the shelf.
What will you do?
Supply
The amount of goods
available
Chapter 1, Opener
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Slide 5
Understanding Supply
Law of Supply
Producers offer more of a
good as its price increases
and less as its price falls
Chapter 1, Opener
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Slide 6
Law of Supply
• How does the law of supply affect the
quantity supplied?
– As prices rise, producers will offer more
– New suppliers will enter the market in the
hopes of making a profit.
Chapter 5, Section 1
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Slide 7
The Law of Supply
• The law of supply includes two
movements:
• Individual firms changing their level of
production
• Firms entering or exiting the market
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Slide 8
Understanding Supply
Quantity supplied
The amount that a
supplier is willing and able
to supply at a specific
price
Chapter 1, Opener
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Slide 9
Market Entry
• Checkpoint: Why do firms increase
production when the price of a good
goes up?
– To make more money. Duh.
– What type of music is popular now?
• Why are so many bands/artists supplying this type
of music?
Chapter 5, Section 1
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Slide 10
Supply Schedule
• The supply schedule lists
how many slices of pizza
one pizzeria will offer at
different prices. The
market supply schedule
represents all suppliers in
a market.
– What does the individual
supply schedule tell you
about the pizzeria
owner’s decisions?
– How does the market
supply schedule
compare to the individual
supply schedule?
Chapter 5, Section 1
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Slide 11
Understanding Supply
What are the only two variables in a supply
or market supply schedule?
• Price charged
• Quantity supplied
variable
A factor that can change
Chapter 1, Opener
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Slide 12
The Supply Graph
• A supply schedule goes opposite direction than
demand. SUPPLY = WUZZ SUP!
– A supply curve always rises from left to right because
higher prices leads to higher output.
– Checkpoint: What are the two variables represented
in a supply schedule or supply curve?
Chapter 5, Section 1
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Slide 13
Elasticity of Supply
• Elasticity of supply, based on the same
concept of elasticity of demand, measures
how firms will respond to changes in the
price of a good.
– Elastic
• When elasticity is greater than one, supply is very
sensitive to price changes
– Inelastic
• When elasticity is less than one, supply is not very
responsive to price changes.
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Slide 14
Elasticity
• What is the main factor that determines whether
the supply of a good will be elastic or inelastic?
– Remember, we are thinking how much/little a business
is willing and able to supply
• Time. In the short run, a firm can’t easily
change its output level.
• Read “Elasticity of Supply in the Short Run”
pg 114
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Slide 15
Elasticity in the Short Run
In the short run, it is difficult for many firms to
change its output level, so supply is inelastic. Name
a business which has inelastic supply in the short
run.
On the other hand, some
businesses are elastic in the
short run. Name one.
Barbershops/salons.
Why?
Chapter 5, Section 1
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Slide 16
Trivia Time!
• What is this barber
shop thingie
called?
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Slide 17
Elasticity in the Long Run
• In the long run, supply can become more
elastic.
• Just like demand, supply becomes more
elastic if the supplier has a longer time to
respond to a price change.
• How does a business that is highly elastic
respond to a fall in prices?
Chapter 5, Section 1
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Slide 18
Review
• Now that you have learned how the law of
supply affects the quantity supplied, go
back and answer the Chapter Essential
Question.
– How do suppliers decide what goods and
services to offer?
Chapter 5, Section 1
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Slide 19