Supply Chapter 4

SUPPLY The quantity of goods and services that producers are willing to offer at various prices during a given time period.

LAW OF SUPPLY States that producers supply more goods and services when they can sell them at higher prices and fewer goods and services when they must sell them at lower prices.

EXAMPLE If producers of Ipods can charge $300 for their products, they will make more Ipods than if they could charge only $200. In other words, the higher price will lead to a larger quantity of Ipods supplied.

Producers vary the supply of certain goods and services in order to gain the largest profit.

PROFIT The amount of money remaining after producers have paid all of their costs – a producer makes a profit when revenues are greater than the costs of production (salaries, rent, bills, etc.).

There are two ways to show the relation ship between the price of the good or service and the quantity that producers will supply.

Supply Schedule – this schedule lists each quantity of a product that producers are willing to to supply at various market prices. Supply Curves – plots on a graph the information from a supply schedule.

Because markets do not stand still, supply curves will shift to the left (decrease in supply) or the right (increase in supply).

SHIFTS IN SUPPLY ARE CAUSED BY: Prices of resources. Technology Competition Prices of related goods Government tools ( i.e. – taxes)