Transcript File

Section 1: What is Supply?
Supply= The amount of a product
offered for sale at all possible prices in
the market.
 Law of Supply= As supply increases, price
increases.

Individual supply curve= shows quantity
supplied of the product by one person in
the market.
 Market supply curve= shows quantity
supplied by all firms offering the product
in the open market.

As price changes in the market, the
quantity supplied will change.
 This is represented by moving to different
points along the supply curve.

Sometimes supplies are willing to supply
more or less of a product at a certain price.
 This causes a shift in the supply curve.
 The reasons for this are:

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Cost of Inputs
Productivity
Technology
Taxes and Subsidies
Expectations
Government Regulations
Number of Sellers
Inputs refer to things such as labor and
packaging costs.
 As these costs increase, the producer is
less willing to produce as many units at
the same price.

When workers become more productive
for whatever reason, productivity
increases.
 This increase causes the producer to
offer more of the product at the given
price. This would be shown as a shift to
the right of the supply curve.

New technology can cause an increase
in production efficiency.
 This increase in production leads to the
producer to offer more of the product at
the same price.
 This is also shown as a shift to the right of
the supply curve.

All producers pay taxes to the
government. This is viewed as a cost
and affects prices.
 As taxes decrease, producers are more
willing to produce more of the product
at the same price. This causes a shift to
the right of the supply curve.
 Subsidies= payments from the
government to producers to protect
certain industries. (mostly farmers)

If producers expect the price of their
product to increase in the future, they
will hold back some of their supply to sell
at higher prices later.
 This causes the supply curve to shift to
the left.

Many producers face regulations by the
government in attempt to protect
consumers.
 Example: government passes a law to
require all vehicles have 4 air bags
instead of two.
 This will increase production cost and
producers will offer less cars at the same
price causing the curve to shift to the
left.

As more suppliers enter the market, more
products are offered at similar prices.
 This is shown as a shift to the right in the
supply curve.
 As suppliers leave the market, the
opposite occurs.

Measure of how quantity supplied reacts
to a change in price.
 Small increase in price -> larger increase
in quantity supplied= elastic supply
 Small increase -> smaller change in
quantity supplied= inelastic supply
 This is very similar to demand elasticity
with the exception that goods are being
sold instead of bought.

Substitutes and the ability to delay
purchase were very important with
demand elasticity but have no effect on
supply elasticity.
 Only production considerations
determine supply elasticity.
 How quickly can a producer react to a
price change? That determines the
elasticity of a product.
