1. Chapter 5.1
What is Supply?
Pgs. 113 – 120

2. An Introduction to Supply
Supply – how much would be offered at a given price
Law of Supply – the higher the price the more you’d be willing to supply
Price & quantity supplied are directly related
The Supply Schedule
Price
Quantity
$20 10
$16 8
$12 6 $8 4 $4 2

3. Cont. Market Supply You should notice that we see a change in supply
More is offered at every price level

4. Changes in Quantity Supplied
What causes a change in quantity demanded?
Price
Well, supply works the same way
Only backwards

5. Change in Supply
A change in supply – more/less is offered at every price level
Cost of inputs
Raw materials change price
RM price up = supply down
RM price down = supply up
Productivity
This is getting more output per unit input
This is essentially reducing input costs per unit
Technology
New tech can increase productivity

6. Cont. Taxes & Subsidies Expectations Government Regulations
Taxes act as costs
They go up it’s like an increase in the cost of inputs
And vice versa
Rebates act to reduce the input costs
Expectations
If the price is expected to go up I might want to supply more
Government Regulations
See cost of inputs

7. Cont. Number of Sellers More people selling stuff = more stuff
Remember when we did market supply?

8. Elasticity of Supply Did anyone understand this as they read it?
Good news!
You don’t need it!