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Published byNorah Montgomery Modified over 9 years ago
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Law of Supply and Supply Curve Supply
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Law of Supply – economic rule stating that price and quantity supplied move in the same direction -As Price goes up -Quantity Supplied goes up
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Supply = Producers Quantity Supplied Amount of good or service that producers are willing and able to supply at a specific price. Supply Curve Upward-sloping line that represents the relationship between quantities supplied at possible prices Supply Schedule for CD’s Price per CDQuantity Supplied (in Millions) $10 $11 $12 $13 $14 $15 $16 $17 $18 $19 $20 100 200 300 400 500 600 700 800 900 1,000 1,100
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Changes in Supply The Concept of supply is producer sided. What could factors could effect the Supply curve?
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Determinants of Supply 1. Price of Inputs Raw materials, wages for labor, price of materials needed to make a product change. 2. Number of Firms in the Industry As more companies enter industry…more products are supplied at every price. As less enter industry = less supplied 3. Taxes Taxes go up = More expensive to produce = Less supplied 4. Technology Any improvement in technology will increase supply. It reduces the cost of production
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Diminishing Returns Law of Diminishing Returns As more units of a factor of production (labor) are added to other factors of production (equipment) after some point total output continues to increase but at a diminishing rate
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