Supply Supply is a relation showing the various amounts of a commodity that a seller would be willing and able to make available for sale at possible alternative prices during a given period of time, all other things remaining the same. A supply curve shows the quantity supplied of a good at various prices other things remaining the same.

Supply Curve Price Quantity Supply Price is measured on the vertical axis. Quantity is measured on the horizontal axis. 0

Supply Schedule Assume the following supply schedule exists. –PriceQuantity –$ 15 –$ 515 –$1030 –$1545 –$2060 Graph the price/quantity combinations.

Supply Curve Price Quantity Supply Supply curves slope up because, other things remaining the same, a higher price covers the increased cost of producing more. 0

Supply Definitions In economics, a clear distinction is made between changes in the amounts people are willing and able to sell which occur because of a change in the price of a good and changes which occur because of changes in other variables. They are called: –A change in quantity supplied. –A change in supply.

A Change in Quantity Supplied A change in quantity supplied occurs when a change in the price of the good itself causes a seller to sell more or less of the good. –An increase in price results in an increase in quantity supplied. –A decrease in price results in a decrease in quantity supplied. A change in quantity supplied is shown by moving along the supply curve.

A Change in Quantity Supplied Price Quantity P2P2 P1P1 A B Q 1 Q 2 A movement from point A to point B shows an increase in quantity supplied. At point A, price is P 1 and output is Q 1. At point B, price is P 2 and output is Q 2. 0

A Change in Quantity Supplied Price Quantity P2P2 P1P1 A B Q 1 Q 2 A movement from point B to point A shows a decrease in quantity supplied. At point B, price is P 2 and output is Q 2. At point A, price is P 1 and output is Q 1. 0

A Change in Quantity Supplied We can use simple algebra to understand a change in quantity supplied. –Given an equation that describes quantity supplied as a function of price, we can substitute various prices into the equation and find quantity supplied at each price.

A Change in Quantity Supplied Assume supply can be expressed as: –Q = P where Q is quantity and P is price. Assume also the following price schedule exists: –P = $1; P = $3; P = $5; P = $10; P = $20 Find the quantity supplied at each price and graph the results. What do you get?