Supply

the other side of a market Reference 4.1-4.3

What kinds of goods and services are supplied?

Where there is demand, there is supply.

SUPPLY

 THE WILLINGNESS AND ABILITY TO PRODUCE AND SELL A GOOD OR SERVICE.

Law of Supply

 As the price of a good increases , the quantity supplied of that good increases .

 As the price of a good decreases , the quantity supplied of that good decreases .

Does this sound familiar???

Compare the Law of Supply with the Law of Demand  Discuss with your partner the similarities and differences of the two laws.

• Law of Demand, an inverse relationship between price and quantity demanded.

• Law of Supply, a direct relationship between price and quantity supplied

Supply Schedules and Supply Curves Apples Price $.40

$.60

$.80

$1.00

Quantity Supplied 1000 2000 3000 4000 Typical supply curve: Upward Sloping—a direct relationship

An exception to the Law of Supply :

A Vertical Supply Curve  Goods that can no longer be produced – Stradivarius Violins – Art works – Antiques  When there is no time to produce more.

– Sold-out concert tickets

Consider 2 high schools and the Law of Supply

 NothingFancy H.S.

– Students don’t get paid for A’s.

 BigBucks H.S.

– Students get paid $50.00 for each A.

At which high school would you expect to see more A’s? How does your answer relate to the Law of Supply?

Supply Curves Shift

 Shift to the right – Producers will supply more of the good at all prices  Shift to the Left – Producers will supply less of the good at all prices.

P

Supply increase Supply decrease

P Qs Qs

Factors that Can Cause a Supply Curve to Shift  Resource Prices  Technology  Government Action – Taxes – Subsidies – Quotas  Number of Sellers  Weather

Resource Prices

 Resource Prices rise, producers will supply less. (Left Shift)  Resource Prices fall, producers will supply more (Right Shift)

Technology

 Advancement in technology (skills and knowledge relevant to production) – lowers the cost of production – uses other resources more efficiently 

Right shift

Government Actions

  Taxes – Some can increase per-unit costs (left shift) Subsidies – Government payments for certain actions.

(right shift)  Quotas – government restrictions on production, especially imports (left shift)

Number of Sellers

. More sellers…

 shift supply curve to the . . .

right

Classwork:

   Review p. 90-103 Complete Section Review, p. 103 #2-7 Optional, extra credit*: Read and answer the questions, p. 100/101 – “The Beatles” – “Taxes, Tariffs & America’s Great Depression” Homework: P. 104-105 QToA #1-9

 Elastic supply = %change Qs > %change P  Inelastic Supply = %change Qs < %change price  Unit elastic Supply = %change Qs = %change price

Emergency Homework

 Read and note Ch 4.2 p. 95-103  Complete Section Review #1-7 – Question #1 is definitions. Instead of re writing them, you may highlight them in your notes.