SUPPLY and stuff

Intro Why firms in a free enterprise economy sell products? To make profits. Its all about the Benjamins BABY

How might the firms’ incentive for greater profits affect and be affected by a growing community? New stores and restaurants—suppliers—may move into the area. The new businesses have based their decision on the increased demand of the growing community

Supply Main Ideas Supply is the amount of a product offered for sale at all possible prices in a market. The Law of Supply states that more product will be offered for sale at higher prices than at lower prices. Normal individual supply curves have a positive slope that goes up from left to right; if price goes up, quantity supplied goes up as well. The market supply curve is similar to the individual supply curve, except that it shows the quantities offered by all producers in a given market. Change in quantity supplied refers to a change in the quantity of a product offered for sale in direct response to a change in price.

Supply Curve: Supply Schedule: A graph that shows the quantities supplied at each and every possible price Supply Schedule: a table showing the quantities that would be produced or offered for sale at each and every possible price in the market at a given point in time.

How does the supply curve compare to the demand curve you read about in the previous chapter? The supply curve slopes in the opposite direction. Demand Supply

Market Supply Curve Figure 5.2 pg 130 Supply curve that shows quantities offered at various prices by all firms that sell the same product in the given market. Figure 5.2 pg 130 Answer the critical thinking question. It would shift to the right because another firm would be adding additional units of output, in this case burritos, to the ones already being offered by the first two suppliers.

Quantity Supplied Quantity Supplied: Change in Quantity Supplied: The amount that a single producer or all producers bring to the market at any given time. Change in Quantity Supplied: The change in the amount offered for sale in response to a change in price.

Quantity Supplied What causes a change in quantity supplied? a change in the price of the product What do you think will cause a change in supply? something other than price

Change in Supply Change in Supply: Different amounts offered for sale at each and every possible price in the market; Shift in supply curve

Change of Supply Main Ideas Whereas a change in quantity supplied occurs only when prices change, a change in supply occurs when quantities change even though price remains constant. Factors that can cause a change in supply include: cost of resources productivity technology taxes subsidies government regulations number of sellers expectations.

How does the cost of resources affect supply? When the cost of resources decreases, supply increases. When the cost of resources increases, supply decreases. How can management increase productivity? by training and motivating workers

Supply Elasticity Main Ideas Supply elasticity is a measure of the degree to which the quantity supplied responds to a change in price. Like demand, supply can be elastic, inelastic, or unit elastic. Production considerations alone determine supply elasticity. If a firm can adjust to new prices quickly, then supply is likely to be elastic. If adjustments take much longer, then supply is likely to be inelastic.

Supply Elasticity Supply Elasticity What does it mean? Read pg. 135 Responsiveness of quantity supplied to a change in price. What does it mean? Read pg. 135 Elastic Supply: more than 1 Inelastic Supply: less than 1 Unit Elastic Supply: exactly 1

Supply Elasticity What determines? The time a firm can adjust to new prices: Quickly: Elastic Longer: Inelastic.

WRAP-UP Create a Venn Diagram of elasticities of supply and demand? 

Answers How are the elasticities of supply and demand similar? How do they differ? The elasticities of supply and demand are similar in that both are a change in quantity demanded or supplied proportional (or not) to price. Unlike demand elasticity, however, supply elasticity is determined only by production issues. Demand elasticity is determined by how much income is used, whether there are substitutes available, and whether the purchase can be delayed.