Law of Supply and Elasticity of Supply Supply: the amount of goods available

Law of Supply  Law of Supply: the higher the price, the larger the quantity produced  P QS  Quantity Supplied: how much of a good is offered for sale at a specific price - -the amount a supplier is willing and able to supply at a certain price

Supply Schedule Price Per Slice of Pizza ($) Slices Supplied Per Day (#)

S

Elasticity of Supply Elasticity of Supply: a measure of the way suppliers respond to a change in price Elastic: sensitive/responsive to change in price (greater than 1) Inelastic: not sensitive or not responsive to a change in price (less than 1) Unitary: Equal change in price to equal change in supply (= to 1)

Elasticity of Supply A supplier’s responsiveness to a price change is called _________________ (think like a supplier/seller) 3 Factors that will determine a product’s elasticity 1.Availability of resources required to make the product 2.Amount of time required to make the product 3.Skill level of the worker needed to make the product Elasticity of Supply

Elastic Supply A product has elastic supply when a price change causes a significant change in the quantity supplied. (What would have to be true (of a product) to allow a seller to quickly increase production if the market price goes up?) 1.Abundance of resources required to make the product 2.Product can be made quickly 3.Low skill level of workers required

Slope of an Elastic supply curve Remember, if the price changes, the quantity supplied changes a lot. This creates a flatter curve. P Q P1 Q1 P2 Q2 s

Inelastic Supply A price change causes very little change in the quantity supplied= Inelastic. This happens because… 1.The product requires scarce resources 2. It takes a long time to make 3. It requires a high skill level of workers examples? Hand crafted furniture diamonds

Slope of an inelastic supply curve If the market price goes up but the supplier cannot increase production very much, then this creates a steeper curve. P Q s P1 Q1 P2 Q2