1. Supply

2. Supply
Quantity of a good/service producers are willing and able to sell at a specific price.
Curve: UPWARD from lower left --> right
LAW OF SUPPLY:
Producers are willing to sell more at a higher prices.
Q sold as P and as P

3. Supply Schedule: Masks @ Halloween
Price
Quantity 30
350 25
300 20
250 15
200 10
150 5
100 P S Q
What quantities of masks will be supplied at $17.50?
What conclusions about producer supply can you draw
from this schedule?

4. Determinants of Supply
Price of Resources:
Increase in cost of resources = decrease in supply (leftward shift)
Technology and Productivity:
Resources used more efficiently = more production at same cost (rightward shift)
Ex: Henry Ford --> New technology (increase supply)
Assembly line
Expectations of Producers:
Change quantity offered for sale
Technology/Resources

5. Determinants of Supply
Number of Producers:
When more people produce a good/service supply increases (rightward shift)
Ex: Increase in supply means decrease in price
Lack of competition is attractive to suppliers
Price of Related Goods/Services:
Opportunity costs of producing and selling a particular good or service is a forgone opportunity to produce others.

6. Supply & Demand Interactions
6 TO GO

7. Economic Dilemma:
Consumers will buy more of a good or service when the price is low.
Producers will only sell more of a good or service when prices are high.
In a free market: Sellers are free to sell and buyers are free to buy.
Supply & Demand determine Market Prices:
Price occurs as a result of interactions between people willing to buy and sell.

8. Equilibrium Price
Prices at which the quantity demanded is equal to the quantity supplied.
Generally: producers have an idea of how many units they should sell at a given price.
Seller will usually adjust prices until quantity demanded matches quantity supplied.
Unless the determinants of supply or demand change.

9. Skateboard Market Price Quantity Demanded Quantity Supplied 100
0.5 Million
2.0 Million 80
0.75 M
1.5 M 60
1.0 M 40
1.25 M
0.5 M 20
2.0 M
.25 M .5
1.0
1.5
2.0
2.5
What is the equilibrium price of skateboards?
What is the quantity of skateboards demanded and supplied
at the equilibrium price?

10. Disequilibrium Imbalance between supply and demand.
Very Common
Determinants are constantly changing.
Ex’s:
New sporting goods store opens with lower priced skateboards.
Demand for skateboards fall.
Costs of producing boards lowers.
--> Process of reaching equilibrium will start all over again.
--> 1000s of markets 1000s of products = constant change.

11. Price Controls:
Surplus: is a condition in which the amount supplied is greater than the amount demanded.
Solve:
Cut Prices
Reduce Production
Shortage: is a condition in which prices are set to low and the quantity demanded is greater than quantity supplied.
Increase Prices
Increase Production

12. Surplus and Shortages of Light Weight Jackets80 70 60 50 40 30 20 D 10 Q 5 10 15 20 25 30
According to the graph what happens when jacket prices are
set above the equilibrium?
Below the equilibrium?
If prices rise to $55 what will happen in the market for North Face Jackets?