Aim: What conditions account for changes in supply? Do Now: Write down a list of at least three factors that distinct demand from supply

Law of Supply Higher the prices, larger the quantity supplied Quantity supplied –number of goods offered for sale at specific price Ceteris Paribus – Latin for –Something is only true as long as the assumption is true

Graphic Representation of Supply S 1.Label the graph 2.Label y-axis 3.Label x-axis 4.What does the supply line represent? 5. At what price would the number of suppliers be minimal? Maximum? Why?

The Supply Curve MARKET FOR CARS S - PRODUCERS P QSQS A B C P1 P2 P3 Q1 Q2 Q3 Supply – what producers are able and willing to sell As Price increases more produces are able and willing to participate in the market, which leads to an increase in the Quantity of goods supplied

Important Vocabulary Supply –The relationship between price and quantity supplied Supply schedule –Relationship between price and quantity for a specific good Elasticity of Supply –Measures the way suppliers respond to a change in price; key factor is time-short run the curve is inelastic and long run it is elastic –Supply is inelastic when the output cannot be easily changed

Elasticity of Supply Similar to demand, elasticity of supply is a measure of the way suppliers respond to a change in price If elasticity of supply curve is >1 it is elastic; <1 it is inelastic; =1 it is unitary TimeTime is the key factor in determining whether the supply of a good will be elastic or inelastic Output cannot be easily changed in the short run (inelastic), but most production is flexible in the long run (elastic)

What would cause a shift of supply curve? Change in Input PricesChange in Input Prices –What is meant by Input? Give examples of input that would be true for any business TechnologyTechnology –To what extent is technology relevant to quantity or quality of production? Explain or give example Expectations for the futureExpectations for the future –Why is business mapping/planning crucial for the success of the business? What must one consider while mapping business projections? Number of ConsumersNumber of Consumers –How would production change due to the number of consumers interested in the product?

Supply, Demand, and Government Policies uIn a free, unregulated market system, market forces establish equilibrium prices and exchange quantities. uWhile equilibrium conditions may be efficient, it may be true that not everyone is satisfied. uOne of the roles of economists is to use their theories to assist in the development of policies.

Price Controls... u Are usually enacted when policymakers believe the market price is unfair to buyers or sellers. u Result in government-created price ceilings and floors.

Price Ceilings & Price Floors Price Ceiling uA legally established maximum price at which a good can be sold. Price Floor uA legally established minimum price at which a good can be sold.

Price Ceilings Two outcomes are possible when the government imposes a price ceiling:  The price ceiling is not binding if set above the equilibrium price.  The price ceiling is binding if set below the equilibrium price, leading to a shortage.

A Price Ceiling That Is Not Binding... $4 3 Quantity of Ice-Cream Cones 0 Price of Ice-Cream Cone Demand Supply Price ceiling Equilibrium price 100 Equilibrium quantity

A Price Ceiling That Is Binding... $3 Quantity of Ice-Cream Cones 0 Price of Ice-Cream Cone 2 Demand Supply Equilibrium price Price ceiling Shortage 125 Quantity demanded 75 Quantity supplied

Price Floors When the government imposes a price floor, two outcomes are possible. uThe price floor is not binding if set below the equilibrium price. uThe price floor is binding if set above the equilibrium price, leading to a surplus.

A Price Floor That Is Not Binding... $3 Quantity of Ice-Cream Cones 0 Price of Ice-Cream Cone 100 Equilibrium quantity Equilibrium price Demand Supply Price floor 2

A Price Floor That Is Binding... $3 Quantity of Ice-Cream Cones 0 Price of Ice-Cream Cone Equilibrium price Demand Supply Price floor$4 120 Quantity supplied 80 Quantity demanded Surplus