Chapter 5 Section 1 What is Supply? ECONOMICS Chapter 5 Section 1 What is Supply?

Chapter 5: Supply DEFINITION Supply is the willingness and ability of producers to offer goods and services for sale.

Law of Supply: Producers willing to sell more of product at higher than at lower price

The Law of Supply Example: Price and Supply Smiths sell tomatoes at farmers’ market willing to offer 24 pounds at standard price of $1 per pound willing to offer 50 pounds at $2 per pound willing to offer 10 pounds at 50 cents per pounds not willing to supply any tomatoes below 50 cents

Supply Schedules Supply schedule is two-column table Individual Supply Schedule Supply schedule is two-column table left-hand column lists various prices of a good or service right-hand column shows quantity supplied at each price

Market Supply Schedules Market supply schedule format similar to supply schedule quantities supplied are much larger market quantity supplied also depends on price Market research used to create market supply schedule some producers want to learn prices, amount offered by all in market

Applying Economics Concepts Imagine that you own a health food store that sells several brands of nutrition bars. Create a supply schedule showing how many bars you would be willing to sell each month at prices of $5, $4, $3, $2, $1.

Supply Curves Individual Supply Curve Supply curve is graphic representation of law of supply Supply schedule and curve based on following assumption: all economic factors except price remain the same

Supply Curves Market Supply Curve Market supply curve differs in scope from individual supply curve both constructed same way Supply curves for all types of producers follow law of supply will provide more at higher prices although costs more to produce more Why? higher prices signal potential for higher profits

Applying Economics Concepts Use the supply schedule for nutrition bars you created earlier to create a supply curve.

Critical Thinking Why does a supply curve slope upward? How is the law of supply similar to the law of demand? How is it different? Focus on one item you buy regularly for which the price has changed. How did this change in price influence supply?

Critical Thinking 4. Create a market supply curve for skis using the market supply schedule below. Price per Pair ($) Quantity Supplied 500 600 425 450 350 325 275 225 200 150 125 100

Critical Thinking 5. Write a brief explanation of the graph you created in #4 6. Why might producers not always be able to sell their products at the higher prices they prefer? Think about the law of demand and supply and the different attitudes that consumers and producers have towards price. 7. How might the market resolve this difference?