Transcript Supply - Meant4Teachers.com

Supply
Unit 2 – Lesson 2
What is Supply?
 The economic concept of supply refers to the
relationship between price and quantity supplied.
 Generally as producers receive a higher price, they
produce more.
 In addition the higher the price is the more businesses
are attracted to produce the product.
Supply of Butter
Price
(kg)
Quantity
Supplied(kg)
20
10,000
16
8,000
12
5,000
8
2,000
6
0
 As you can see, as the
price decreases, the
amount supplied
decreases.
 At a certain price it is
no longer financially
feasible for a producer
to make a product and
they will shut-down
Graphical Represention
Shifts in Supply - Increase
 Just like the demand curve, the supply curve can be
shifted
 Factors which may increase the supply of a product at
all prices include:
a. the introduction of more efficient production technology,
a. cheaper and/or more readily available raw materials to
produce the product
Example
Assume the dairy has come up with a new technology
that allows them to produce more cheaply
Price $
Quantity
Supplied ‘Kgs’
‘S’
$20
10,000
Quantity
Supplied
‘Kgs’
‘S1’
13,000
$16
8,000
11,000
$12
5,000
8,000
$8
2,000
5,000
$6
0
3,000
The chart illustrates how
supply has increased at
all prices levels and has
even allowed the
company to keep
producing at a lower
price than before.
Graphical Representation
of Increase in Supply
Shifts in Supply - decrease
 Again, as with the demand curve, factors may lead to
a decrease in the quantity supplied at all price
levels. These factors may include:
a) more
expensive and/or a decrease in the quantity of
available raw materials,
b) a decrease
Scenario
 The outbreak of a disease among the dairy cow
population leads to a decrease in milk supply so less
is available for butter production and at a higher price.
The quantity supplied is lower at all price levels.
Price $
$20
Quantity Supplied
‘Kgs’
‘S’
10,000
Quantity Supplied
‘Kgs’
‘S1’
7,000
$16
8,000
5,000
$12
5,000
2,000
$8
2,000
0
$6
0
0
The chart illustrates
how supply has
decreased at all prices
levels and how the
diary must stop
production at a higher
price level than
before..
Graphical Representation
of Decrease in Supply
Homework
 You are the president of an oil company. A war in the
Middle East has caused higher oil prices.
 The amount of oil your company is supplying is almost at
capacity and the land from which you are drilling oil and
your refineries are producing as much oil as they can.

You want to increase your oil producing capacity in order
to take advantage of the higher prices and increase your
profits.
 Write a paragraph describing at least three ways that you
could increase your capacity for the amount of oil you are
supplying to the market.