Supply Law of Supply: the higher the price, the larger the quantity produced (ceteris paribus) The 2 factors influencing the law of supply are: 1. Individual firms changing their level of production - if a firm is making a profit selling a product, then a price ↑ will ↑ profits - ↑ profits will encourage an ↑ in supply - same holds true with ↓ price, profits and supply 2. Firms entering/exiting the market - ↑ prices encourage more firms to enter market which ↑ supply - same holds true with ↓ prices causing firms to exit market which ↓ supply

The supply curve is a visual representation of the supply schedule - table that shows relationship between price and quantity supplied - market supply schedule shows quantity supplied for entire market, not just one individual consumer Supply and Demand Together market price: quantity supplied = quantity demanded EQUILIBRIUM Market-clearing price: the price that will bring the market back to equilibrium (balances quantity supplied with quantity demanded) EQUILIBRIUM PRICE the quantity supplied and the quantity demanded at the equilibrium price EQILIBRIUM QUANTITY

Surplus: a situation when the quantity supplied is greater than the quantity demanded - if the actual market price is higher than the equilibrium price, there will be a surplus - to eliminate the surplus, producers will lower the price until the market reaches equilibrium Shortage: a situation in which the quantity supplied is less than the quantity demanded - if the actual market price is lower than the equilibrium price, there will be a shortage of the good - sellers will respond to the shortage by raising the price of the good until the market reaches equilibrium The supply curve shifts upward because, other things equal, a higher price means a greater quantity supplied

Factors that Shift Supply Input Prices Expectations Number of Sellers Technology