1. SUPPLY

2. OBJECTIVES Explain the Law of Supply. Revise ‘Ceteris Paribus’.
Graphically show how the law of supply works.
Distinguish between movements along and shifts in the demand curve.

3. REVIEW QUESTION
What is “ceteris paribus”

4. DEFINITION OF SUPPLY
Is the quantity of a product that is offered for sale at a given price (ceteris paribus)

5. What do you think this curve means?

6. Let’s see!
INVESTIGATION

7. THE LAW OF SUPPLY States that:
as the price for a product rises, the quantity supplied will increase and vice versa,
as prices decrease supply will fall.

8. WHY WOULD QUANTITY SUPPLIED INCREASE????
$1.00
$1.25
$1.67
$2.50

9. Why would QUANTITY Supplied Increase?
PROFIT = INCOME – COSTS
If the price goes up, (ceteris paribus) INCOME increases, but COSTS remain unchanged), so PROFITS increase.
Firms make more profit on
each unit sold.
Therefore, firms want to
make and sell more units

10. Movements Along Supply Curves
Changes in Price will cause movements along the supply curve.
INCREASE
DECREASE

11. ACTIVITY
COMPLETE the SUPPLY TABLE AND CURVE using the information provided for you on the worksheet

12. SHIFTS IN SUPPLY

13. SHIFTS IN SUPPLY Changes in certain factors, BESIDES
(NOT)PRICE can cause a SHIFT IN SUPPLY

14. LET’s EXPLORE The factors that cause a shift in supply
Show these using graphs

15. FACTORS THAT CAUSE SHIFTS IN SUPPLY
Number of suppliers
Production Costs
Competition
Technology
Supplier’s expectations

16. SHIFTS IN SUPPLY
If production costs increase, It causes Supply to decrease
Supply curve
SHIFTS TO THE LEFT

17. SHIFTS IN SUPPLY
NUMBER OF SUPPLIERS – If the number of suppliers increases, it will also cause the supply curve to shift to the right.
WHY ?

18. SHIFTS IN SUPPLY
COMPETITION: If the number of firms offering the same goods increases
Supply curve will SHIFT TO THE RIGHT

19. SHIFTS IN SUPPLY
TECHNOLOGY : an improvement in technology will cause an increase in products
Supply curve will SHIFT TO THE RIGHT

20. SUMMARY
SUPPLY SHIFTS LEFT
SUPPLY SHIFTS RIGHT

21. SO…
Movements along the supply curve are due to changes in price (ceteris paribus).
Shifts in the supply curve are due to all other factors (except price)

22. VOCABULARY SUPPLY COST
Is the quantity of a product that is offered for sale at a given price (ceteris paribus)
The money that is paid / spent on production /goods
INCOME
Money that the business receives from the sale of goods
PROFIT
The surplus (extra)income remaining after total costs are deducted from total revenue
COMPETITION
CETERIS PARIBUS
Rivalry among sellers trying to achieve such goals
All other factors remain unchanged (constant)