1. Supply

2. What is Supply? Supply is how much a firm is willing and able to sell at every given price. Supply is how much a firm is willing and able to sell at every given price. Lets say a company is starting to make video games. They have to decide how many games to make and what price to charge. Lets say a company is starting to make video games. They have to decide how many games to make and what price to charge. Profits Profits

3. Law of Supply The higher the video game company can charge for games, the more it is willing to supply. The higher the video game company can charge for games, the more it is willing to supply. Law of Supply – If the price of a product increases, the quantity supplied increases. Law of Supply – If the price of a product increases, the quantity supplied increases.

4. Quantity Supplied Quantity Supplied - the amount of a good (or service) produced by firms at a particular price. Quantity Supplied - the amount of a good (or service) produced by firms at a particular price. While demand typically refers to consumers, supply typically refers to firms. While demand typically refers to consumers, supply typically refers to firms.

5. Law of Supply As Price Increases… Quantity supplied increases PRICE SUPPLY PRICE As Price Falls… Quantity supplied falls

6. Supply Schedule

10. Supply Schedules and Curves Supply Curve - a diagram showing the relationship between the price of a good and the quantity supplied per period of time. Supply Curve - a diagram showing the relationship between the price of a good and the quantity supplied per period of time.

11. Supply Curve

12. P($) Q s per month Remember to ALWAYS label your axes!

13. Supply Curve P($) Q s per month 5 10 15 20 0 51015

14. Supply Curve P($) Q s per month 5 10 15 20 0 51015 A

15. Supply Curve P($) Q s per month 5 10 15 20 0 51015 A B

16. Supply Curve P($) Q s per month 5 10 15 20 0 51015 A B C

17. Supply Curve Q s per month 5 10 15 20 0 51015 A B C P($) S

18. Change in S vs. Change in Q s Change in Supply - a shift of the supply curve Change in Supply - a shift of the supply curve Changes in Supply Changes in Supply Increase in supply - supply curve shifts to the rightIncrease in supply - supply curve shifts to the right Decrease in supply - supply curve shifts to the leftDecrease in supply - supply curve shifts to the left

19. Change in Supply Factors Which Cause a Change in Supply 1. Prices of Relevant Resources 2. Technology 3. Number of Sellers 4. Expectations of Future Price 5. Taxes, Regulations and Subsidies 6. Changes in the Availability of Credit

20. Price of Relevant Resources Let’s say the cost of plastic (used in making CDs) decreases Let’s say the cost of plastic (used in making CDs) decreases It is now cheaper to make every quantity of CDs It is now cheaper to make every quantity of CDs

21. Resource Price Decrease Thus the firm is willing to supply every quantity at a lower price. Thus the firm is willing to supply every quantity at a lower price. Or in other words, at every price the firm is willing to supply more of the good Or in other words, at every price the firm is willing to supply more of the good In summary, if the price of a resource goes down, supply increases (shifts to the right) In summary, if the price of a resource goes down, supply increases (shifts to the right)

22. Supply Curve Shift P($) Q s per month 5 10 15 20 0 51015 A A’ Old Supply Curve New Supply Curve

23. Technology Improvement in technology lowers costs Improvement in technology lowers costs Lower cost of production increases SupplyLower cost of production increases Supply Worsening of technology increases costs Worsening of technology increases costs Higher cost of production decreases SupplyHigher cost of production decreases Supply

24. Number of Sellers More sellers in the market means more quantity is being supplied at every price More sellers in the market means more quantity is being supplied at every price Increase in supply of the goodIncrease in supply of the good Less sellers in the market means less quantity is being supplied at every price Less sellers in the market means less quantity is being supplied at every price Decrease supply of the goodDecrease supply of the good

25. Expectations of Future Prices Firms expect price of their good to decrease in the future Firms expect price of their good to decrease in the future Supply increases todaySupply increases today Firm would prefer to sell today when price is higherFirm would prefer to sell today when price is higher

26. Expectations of Future Prices Firms expect price of their good to increase in the future Firms expect price of their good to increase in the future Supply decreases todaySupply decreases today Firm would prefer to wait until the good can be sold for a higher priceFirm would prefer to wait until the good can be sold for a higher price

27. Taxes and Subsidies Increase in tax on the good decreases supply Increase in tax on the good decreases supply Raises the cost of productionRaises the cost of production Decrease in tax on the good increases supply Decrease in tax on the good increases supply Lowers the cost of productionLowers the cost of production

28. Taxes and Subsidies A subsidy is an amount that is paid to the producer for each unit of a good produced A subsidy is an amount that is paid to the producer for each unit of a good produced –financial assistance Ex: Hope Scholarship –A subsidy can be used to support businesses that might otherwise fail Increase in Subsidy on the Good Increases Supply Increase in Subsidy on the Good Increases Supply Lowers the costs of productionLowers the costs of production Decrease in Subsidy on the Good Decreases Supply Decrease in Subsidy on the Good Decreases Supply Raises the costs of productionRaises the costs of production

29. Availability of Credit If it is easier for the firm to borrow money, the firm will be able to produce more If it is easier for the firm to borrow money, the firm will be able to produce more –Thus Supply increases If it is more difficult for the firm to borrow money, the firm will have to produce less If it is more difficult for the firm to borrow money, the firm will have to produce less –Thus Supply decreases

30. Increase in Supply

31. P QsQs

32. P QsQs S

33. P QsQs S

34. P QsQs S S’

35. Increase in Q s

36. P($) Q s per month

37. Increase in Q s P($) Q s per month S

38. Increase in Q s P($) Q s per month A S

39. Increase in Q s P($) Q s per month A S

40. Increase in Q s P($) Q s per month A B S