1. Supply

2. What is supply?
quantities (Q) of a good or service that a firm is willing and able to make available for sale at different prices (P)

3. What is a supply schedule?
table listing the quantities supplied (QS) at various prices (P)

4. What is a supply curve?
graph of the relationship b/t the price (P) of a good and the quantity supplied (QS)
S = supply
pos. slope
P = prices
Y-axis
Q = quantities
X-axis

5. What is the law of supply?
the QS of a good will be greater at higher P than will the QS at lower P (ceteris paribus)
positive relationship b/t P and Q

6. Markets & the law of supply
market supply schedule/curve: P and QS for all suppliers of a good combined (the market)
same principles apply to market as individuals

7. Change in quantity supplied vs. change in supply
change in quantity supplied (ΔQS)
due to changes in:
price
results in:
movement along the supply curve
change in supply
due to changes in:
nonprice determinants
results in:
supply curve shift

8. Change in supply
INCREASE = shift to RIGHT
DECREASE = shift to LEFT

9. determinants of supply
Technology
Input prices (labor, capital, land, raw materials)
Expected future prices
Size of the industry (number of producers)
Prices of related outputs
Taxes/subsidies

10. What does the price elasticity of supply measure?
responsive of QS to price changes
price elasticity of supply = %ΔQS / %ΔP
%ΔQS = |Q2 – Q1| / Q1
%ΔP = |P2 – P1| / P1

11. > 1 price elastic < 1 price inelastic = 1 unitary elastic
(responsive)
< 1
price inelastic
(not very responsive)
= 1
unitary elastic