Supply Chapter 5 Section 1

Supply – the amount of goods available Law of Supply – the higher the price the larger the quantity produced Quantity supplied – how much of a good is offered for sale at a specific price As the price of a good rises, existing firms will produce more in order to earn additional revenue

As price increases Quantity supplied increases

As price falls Quantity supplied falls

If the price of pizzas rise, but the firms cost of making pizza stays the same the pizzeria will earn a higher profit With raising prices, a pizzeria will look like a good opportunity to make money Raising prices drew new firms to the market and added to the quantity supplied

1970’s and 1990’s 1970’s Disco – Disco is king John Travolta, Kiss… Record companies signed more disco artists Disco albums made a lot of money Disco lasted a short time Early 1980’s stores could not even sell disco albums

1979

1990’s – Grunge bands Pearl Jam, Nirvana… Record albums produced more and more albums Multiple bands were signed

Supply Schedule Supply Schedule – shows the relationship between price and quantity supplied for a specific good. – Only has two Variables – factors that can change – Lower price – fewer goods supplied Focus more on other items, breadsticks… – Ceteris Paribus still applies

Supply Curve – similar to demand curve only horizontal axis measures quantity supplied Market supply curve – for the whole city, region Elasticity – Orange trees Inelastic… why?

Price falls for oranges – Inelastic…. Why? Barbers – Elastic or inelastic? Price rises Options if prices rise? Supply can be elastic over time – Sell off land, plant more trees…