Transcript What is Supply? - Cloudfront.net

WHAT IS
SUPPLY?
Chapter 5, Section 1
WARM-UP:
If you owned a store, how would
you decide how much product to
supply in your store at any given
time and why?
LAW OF SUPPLY
Suppliers will normally offer more for
sale at high prices and less at lower
prices.
Imagine you are the Manager of Best
Buy – you will make more profit on
higher priced items so you make
more available at
higher prices.
Supply – the amount of a product that would
be offered for sale at all possible prices that
could prevail in the market.
Supply schedule – a listing of the various
quantities of a particular product supplied at
all possible prices
Supply curveA graphical representation
of the supply schedule
showing various quantities
supplied at each and
every price
Supply Schedule & Curve
 Market supply curve – the supply
curve that shows the quantities
offered at various prices by all firms
that offer the product for sale
(Ex. Best Buy & Apple store)
 Quantity supplied – the amount
that producers bring to market at
any given price
 Change in quantity supplied – the
change in amount offered for sale
in response to a change in price.
CHANGEs IN SUPPLY
A situation where suppliers offer different amount
of products for sale at all possible prices in the
market. What causes these changes:
Cost of Inputs – If cost of inputs lowers, they supply
more. If cost of inputs raises, they supply less.
Productivity – If they make more in same time
frame, they supply more. If they make less, they
supply less.
Technology - new technology
lowers cost of production and
increases productivity =
increase in supply
Taxes and subsidies –
A subsidy is a government
payment to an individual,
business or other group to
encourage or protect a
certain type of economic
activity
Expectations If producers think their price will go up, they
will withhold supply
If they predict lower prices in the future then
they will increase supply
Government Regulations - increased regulations
vs. relaxed regulations
Number of Sellers- the more sellers that enter
the market, the more quantity is supplied
Supply Elasticity
Measure of the way in which quantity supplied
responds to a change in price
 Elastic
 Inelastic
 Unit Elastic
Determinants:
 if a firm can adjust to new prices quickly then supply
is elastic
 If adjustments take longer then supply is likely to be
inelastic
 NO SIMILARITY WITH DEMAND
ELASTICITY!!!!!!!!!