The Law of Supply Economics Chapter 5 Demand and Supply

What is Supply? Supply: What producers are willing to sell at various prices

Supply Schedule: table that shows quantities supplied at different market prices Supply Curve: shows relationship between price and quantity that producers are willing and able to supply Market Supply: sum of all individual quantities supplied Supply Schedule and Curve

PriceQuantity $ $ $ $ $ $0.498 $0.396 $0.294 $0.102 $0.090 Price As Price goes up, Quantity Supplied goes up Quantity Supplied

How Much to Produce? The Law of Supply states: As price increases, quantity supplied increases

Change in Quantity Supplied The movement along the curve reflects a change in quantity supplied. The only factor that causes a change in quantity supplied is price. Price causes movement along the curve

Supply Shifters Anything that is viewed as increasing or decreasing the cost(s) to supply the good or service will change supply. This will shift the curve to the left or to the right.

What Causes Change in Supply? Changes in supply can be caused by a number of factors: 1.Costs of Inputs – land, labor, raw materials, etc. (factors of production) 2.Changes in conditions – Natural disasters/International events 3.Technology – improving productivity 4.Producer Expectations – will prices rise or fall? 5.Number of Sellers – more sellers offering or producing the product 6.Government policy – regulations and subsidies (cash payment aimed at helping a producer to operate)

Supply Headlines Activity How will the Headlines impact Supply? Work alone or with a partner Be prepared to share your answers Video Clip: Indiana Jones: Demand, Supply, Equilibrium, Shifts (7 min) Supply Exit Ticket