Transcript Chapter 21.1

Chapter 21.1
What is Supply?
An Introduction to Supply
 Supply refers to the various quantities of
a good or service that producers are
willing to sell at all possible market
prices. Supply can refer to the output of
one producer or to the total output of all
producers in the market.
 Producers offer different quantities of a
product depending on the price that
buyers are willing to pay.
continued
 Like quantity demanded, quantity
supplied varies according to price, but in
the opposite direction. As the price for a
good rises, the quantity supplied rises
and the quantity demanded falls. As the
price falls, the quantity supplied falls and
the quantity demanded rises.
continued
 The law of supply holds that producers will
normally offer more for sale at higher prices and
less at lower prices. Higher prices mean higher
profit for producers. Higher profits are an
incentive to produce more.
 A supply schedule is a table that shows the
quantities producers are willing to supply at
various prices. A supply schedule shown as a
graph is a supply curve. In the graph, prices
are listed on the vertical axis and quantities on
the horizontal axis.
continued
 Unlike a demand curve, a supply curve
normally slopes upward. This reflects
the fact that suppliers are generally
willing to offer more of a product at a
higher price and less at a lower price.
continued
 Businesses provide goods and services
hoping to make a profit. Profit is the
money a business has left over after it
covers its costs. Businesses try to sell at
prices high enough to cover their costs
with some profit left over. Profit is the
primary goal for business owners in our
economy.
continued
 Producers can choose to use their profits
to increase wages or hire new workers.
They can invest it back into the business
by purchasing new space or equipment.
The owners can also keep the profit for
themselves.
Graphing Market Supply
 The market supply is the total of the
supply schedules for all providers of the
same good or service.
 The market supply curve slopes upward,
like individual supply curves do. This
upward slope shows that all producers in
the market would prefer to offer more of
the product for sale at higher prices and
less at lower prices.
continued
 Price has the most influence on the
quantity supplied. For example, you
would probably be willing to supply more
of your labor at a higher wage than at a
low one.
 Other factors also affect supply. If any
factors change other than price, a
change in supply will occur. That is, the
entire curve will shift.