Supply

 Supply is based on decisions made by producers in various types of businesses.  Supply is the amount of a product that would be offered at all possible prices that could prevail in the market; Do quantities matter?  Law of Supply – producers will offer more for sale at high prices and less at lower prices  Supply is based on what is best for the individual seller  Supply Schedule – list of various quantities of a product supplied at all possible prices in the market  *** Difference between Supply Schedule and Demand Schedule is that prices and quantities move in the same direction on a supply schedule

Supply Curves  You may also put the data from a supply schedule on a graph, resulting in a supply curve. This shows quantities that might work in the market.  A supply curves represents one producer. How could you be a supplier? More labor for more money!  Market Supply Curve – shows quantities offered at a variety of prices by all firms that offer the product for sale in a market.  Quantity supplied – amount that producers bring to the market at a given price  Change in quantity supplied – change in amount offered for sale as a result of a changing price indicated by movement of the supply curve; amount of goods increase as price goes up  Supply and demand combined usually indicates the final price of the product. However, the producer adjust production as they want. Examples?

Change in Supply  There are some variables that could change supply. Maybe a producer is now willing to sell more of the product at a lower price. The curve shifts right. Decrease in supply at a given price, the curve shifts left. Why might this happen? -Cost of inputs – price of production could increase or decrease -Productivity – motivate workers or do things more efficiently = productivity will increase; curve shifts right; more supply at a better price -Technology - new technology usually shifts right; can make more at a lower cost; sometimes parts break and may be hard to obtain or afford; this could shift the curve left -Taxes – costs to firms; if they go up, curve shifts left; sometimes governments offer subsidies; if they are cancelled costs go up, firms leave the market

 -Expectations – if they think the price of the product may go up later, they may withhold some of supply; they may predict lower prices in the future, so may add supply now  Government Regulation – can make costs go up; Examples?  Number of sellers – more firms in the industry; supply curve shifts right because of larger supply; internet resulted in more sellers entering the industry;

Elasticity of Supply  Supply Elasticity – measure of a way which quantity supplied responds to change in price -Elastic – a small increase in price creates and large increase in output -Inelastic – increase in price leads to very little change in output -Unit elastic – price change causes proportional quantity supplied -If a business can adjust to new prices quickly, supply is likely elastic; if adjustments take longer, it is likely inelastic Example: An oil company’s supply is likely inelastic. Why? -What is an example of a supply that is likely elastic?

Differences in Supply Elasticity and Demand Elasticity  Substitutes do not affect supply elasticity.  Ability to delay purchases do not affect supply elasticity.  Production considerations DO affect supply elasticity.