UNIT VI – Fundamentals of Economics Supply UNIT VI – Fundamentals of Economics

What is supply? Amount of goods sold at all possible prices Opposite of demand Usually refers to output of a single producer (individual supply) Also possible to add supply all producers (market supply)

Law of Supply Opposite of the law of demand As price increases, supply increases As price decreases, supply decreases The higher the price of a good, the greater the incentive is for a producer to produce more

Supply Schedule Numerical chart that illustrates the law of supply Price Quantity $50 100 $30 70 $10 10 $5 1

Supply Curve $50 $30 $10 PRICE 0 20 40 60 80 100 QUANTITY

Change in Supply Cost of Resources (Input costs) Labor Productivity Technology Government Policy Subsidies and taxes Producer Expectations Example: if a producer expects prices to drop to low, they may decide to slow down production Number of Producers/Competition

Changes in Supply Curve

Supply Elasticity Measure of how the quantity supplied of a good or service changes in response to changes in price Inelastic example: oil

Supply and Demand at Work Together Surplus – too much supply Shortage – too much demand Equilibrium – point at which a balance between supply and demand are met

Supply and Demand Curve $50 $30 $10 SURPLUS PRICE EQUILIBRIUM POINT SHORTAGE 0 20 40 60 80 100 QUANTITY