1. Supply
Law of Supply: the higher the price, the larger the quantity produced
(ceteris paribus)
The 2 factors influencing the law of supply are:
1. Individual firms changing their level of production
- if a firm is making a profit selling a product, then a price ↑ will
↑ profits
- ↑ profits will encourage an ↑ in supply
- same holds true with ↓ price, profits and supply
2. Firms entering/exiting the market
- ↑ prices encourage more firms to enter market which ↑ supply
- same holds true with ↓ prices causing firms to exit market which ↓
supply

2. The supply curve is a visual representation of the supply schedule
- table that shows relationship between price and
quantity supplied
- market supply schedule shows quantity supplied
for entire market, not just one individual consumer
Supply and Demand Together
market price: quantity supplied = quantity demanded
EQUILIBRIUM
Market-clearing price: the price that will bring the market back to equilibrium (balances quantity supplied with quantity demanded)
EQUILIBRIUM PRICE
the quantity supplied and the quantity demanded at the equilibrium price
EQILIBRIUM QUANTITY

3. Surplus: a situation when the quantity supplied is greater than the quantity demanded
- if the actual market price is higher than the equilibrium price, there will
be a surplus
- to eliminate the surplus, producers will lower the price until the
market reaches equilibrium
Shortage: a situation in which the quantity supplied is less than the quantity demanded
- if the actual market price is lower than the equilibrium price, there
will be a shortage of the good
- sellers will respond to the shortage by raising the price
of the good until the market reaches equilibrium
The supply curve shifts upward because, other things equal, a higher price means a greater quantity supplied

4. Factors that Shift Supply
Input Prices
Expectations
Number of Sellers
Technology