1. SUPPLY Warm UP
1. All of the following can cause an increase in supply except:
A decrease in the cost of input b. fewer sellers in the market place
An increase in productivity d. a change in taxes or subsidies
The supply curve is
Downward sloping b. level
Upward sloping d. irregular
The Law of Supply states that
The quantity supplied varies inversely with its price
The quantity supplied varies irregularly with its price
The quantity demanded varies inversely with its price
The quantity supplied varies directly with its price
4. What product is likely to have the MOST elastic supply curve?
Ice cream cones b. automobiles
c. Ships d. dishwashing machines

2. Price Elasticity of Supply
Price elasticity of supply (PES) measures the relationship between change in quantity supplied following a change in price
Price elasticity of supply
If supply is elastic (i.e. PES > 1), then producers can increase output without a rise in cost or a time delay
If supply is inelastic (i.e. PES <1), then firms find it hard to change production in a given time period.

6. Calculate the PES
PES 1. 2. 3. 4. 5. 6. 7.