1. Chapter 5: Supply
Section 1: What is Supply?

2. What is Supply?
Supply= The amount of a product offered for sale at all possible prices in the market.
Law of Supply= As supply increases, price increases.

3. The Supply Schedule

4. The Supply Curve
Individual supply curve= shows quantity supplied of the product by one person in the market.
Market supply curve= shows quantity supplied by all firms offering the product in the open market.

5. Supply Curve

6. Change in Quantity Supplied
As price changes in the market, the quantity supplied will change.
This is represented by moving to different points along the supply curve.

7. Change in Supply
Sometimes supplies are willing to supply more or less of a product at a certain price.
This causes a shift in the supply curve.
The reasons for this are:
Cost of Inputs
Productivity
Technology
Taxes and Subsidies
Expectations
Government Regulations
Number of Sellers

8. Cost of Inputs
Inputs refer to things such as labor and packaging costs.
As these costs increase, the producer is less willing to produce as many units at the same price.

9. Productivity
When workers become more productive for whatever reason, productivity increases.
This increase causes the producer to offer more of the product at the given price. This would be shown as a shift to the right of the supply curve.

10. Technology
New technology can cause an increase in production efficiency.
This increase in production leads to the producer to offer more of the product at the same price.
This is also shown as a shift to the right of the supply curve.

11. Taxes and Subsidies
All producers pay taxes to the government. This is viewed as a cost and affects prices.
As taxes decrease, producers are more willing to produce more of the product at the same price. This causes a shift to the right of the supply curve.
Subsidies= payments from the government to producers to protect certain industries. (mostly farmers)

12. Expectations
If producers expect the price of their product to increase in the future, they will hold back some of their supply to sell at higher prices later.
This causes the supply curve to shift to the left.

13. Government Regulations
Many producers face regulations by the government in attempt to protect consumers.
Example: government passes a law to require all vehicles have 4 air bags instead of two.
This will increase production cost and producers will offer less cars at the same price causing the curve to shift to the left.

14. Number of Sellers
As more suppliers enter the market, more products are offered at similar prices.
This is shown as a shift to the right in the supply curve.
As suppliers leave the market, the opposite occurs.

15. Elasticity of Supply
Measure of how quantity supplied reacts to a change in price.
Small increase in price -> larger increase in quantity supplied= elastic supply
Small increase -> smaller change in quantity supplied= inelastic supply
This is very similar to demand elasticity with the exception that goods are being sold instead of bought.

16. Determinants of Elasticity
Substitutes and the ability to delay purchase were very important with demand elasticity but have no effect on supply elasticity.
Only production considerations determine supply elasticity.
How quickly can a producer react to a price change? That determines the elasticity of a product.