1 Essential Question: Explain why supply is considered to be “producer” controlled, describe the relationship between supply and price according to the law of supply, explain the differences between elastic and inelastic supply Nature of Supply SECTION 1

2 How is supply different: Supply is mostly controlled by producers. Producers can choose to increase or decrease the quantity of goods or services that they produce. They do this based on their ability to make profit or the money left over after subtracting costs from revenue. Nature of Supply SECTION 1

3 Difference between supply and quantity supplied: Supply—refers to whether or not producers are willing and able to produce. The price of the product must allow them to make profit. As the price increases, so does the supply quantity supplied—the specific amount of a good or service that producers are willing and able to supply at each specific price Nature of Supply SECTION 1

4 Law of supply: Quantity supplied and price have a mirror relationship: Whenever price increases or decreases, the supply does as well. When price of a good or service increases, suppliers are willing to produce more; as price per good or service decreases, suppliers will produce less. Nature of Supply SECTION 1

5 What supply schedules and supply curves illustrate: Supply schedule—A table showing the specific quantity produced at each and every price. Supply curve- The same data as a Supply Schedule shown in Graph form Nature of Supply SECTION 1

Supply Elasticity. Just as with demand, this is the measure of how much quantity supplied changes when the price changes.  If price changes a little but Q.S. changes a lot, there is elastic supply  If price changes a lot but Q.S. changes a little, there is inelastic supply. Nature of Supply SECTION 1

7 Elastic vs. Inelastic Supply Products with Elastic Supply  Are made quickly  Are made inexpensively  Use only a few readily available resources Products with Inelastic Supply  Take time to make  Are expensive to produce  Use resources that are not readily available Nature of Supply SECTION 1

Perfectly Inelastic Supply  When a change in price causes no change in supply.  This is because there are no resources available to produce additional supply Nature of Supply SECTION 1