Chapter 5 - Supply Supply – the amount of a product that would be offered for sale at all possible prices in the market. Law of Supply – suppliers will normally offer more for sale at higher prices and less at lower prices. Suppliers are motivated by profit.

Chapter 5 - Supply Supply Schedule – lists the quantities of a product supplied at all possible prices. Price and Quantity move in the same direction. Individual Supply Curve – illustrates how the quantity that A producer will make varies depending on the price. Market Supply Curve – illustrates the quantities and prices that ALL producers will offer in the market for a product or service. A supply curve moves upward and shows that if one value goes up so will the other.

Changes in Quantity Supplied This is the change in the amount offered for sale due to a change in price. This is illustrated by movement ALONG the supply curve either as an increase or a decrease. Producers have freedom – Price falls too low = slow or stop production or leave market Price rises = Step up production Producers are always looking to take advantage of better prices.

Changes in Supply This is when suppliers offer different amounts of products for sale at all possible prices. This is illustrated by a NEW curve – Curve shifts to the Right = Increase Curve shifts to the Left = Decrease

Factors that Effect Changes in Supply Cost of Inputs (labor, parts, shipping, etc.) Costs Up = Production Down Costs Down = Production Up Productivity (Hawthorne Effect) Technology Taxes – The more companies pay in taxes the more it costs to produce an item. Therefore = ?

Factors that Effect Changes in Supply Subsidies – money that is given to businesses that helps lower the cost of production. Therefore = ? Expectations – Prices expected to rise = Suppliers hold back Prices expected to fall = Suppliers increase production

Factors that Effect Changes in Supply Government Regulations – Foreign Countries Number of Sellers

Elasticity of Supply Measures how sensitive quantity supplied is when there is a change in price: Small increase in price leads to large increase in output = Elastic If supply changes very little to a change in price = Inelastic When firms adjust quickly to a new price = Elastic If adjustment take a long time = Inelastic

Elasticity of Supply **If a firm can react quickly to higher or lower prices Supply is Elastic** **If the firm takes longer to react to a change in prices Supply is Inelastic**