1. Understanding Supply

2. What is Supply? Supply: –The willingness and ability of sellers to produce and offer to sell different quantities of a good at different prices during a specific time period.

3. What is Supply? Example OPEC is an intergovernmental organization made up of countries that have oil resources. (Saudi Arabia, Venezuela, etc.) They meet from time to time to agree how much oil they are willing and able to pump and refine into gasoline and then set production targets for member countries.

4. What is the Law of Supply? Law of Supply: –A law stating that as the price of a good increases, the quantity supplied of the good increases, and as the price of a good decreases, the quantity supplied of the good decreases. –When oil prices are high, OPEC countries increase oil production. When oil prices are low, they cut production

5. Supply Schedule A numerical chart illustrating the law of supply PriceQuantity Supplied 112 228 342 452 560

6. Supply Curve A graph that shows the amount of a good sellers are willing and able to sell at various prices

7. Vertical Supply Curve This exists in a situation where there are a limited amount of a good or service Ex: Theater tickets; stadium tickets, certain antiques 0 10 20 30 40 50 60 70 0 10 20 30

8. Change in Supply vs. Change in Quantity Supplied A change in quantity supplied refers to a movement along a given supply curve. This is brought on ONLY by a change in a good’s price S1S1 A B

9. The Supply Curve Shifts When sellers want to sell more or less of a good at every price. When supply increases, the curve shifts right. When supply decreases, the curve shifts left.

10. What Factors Cause Supply Curves to Shift? 1)Resource prices 2)Changes in technology 3)Government – taxes, subsidies, quotas 4)Number of sellers 5)Seller expectations (future price) 6)Weather

11. What Factors Cause Supply Curves to Shift? Resource Prices: –Land, labor, and capital Technology: –The ability to produce more output with a fixed amount of resources –Advancement in technology lowers the per- unit cost, or average cost

12. What Factors Cause Supply Curves to Shift? Government –Taxes: Taxes on the per-unit costs (avg. cost of a good) increase or decrease –Subsidies: A financial payment made by the government –Quotas: A legal limit on the number of units of a foreign produced good (import) that can enter the country

13. What Factors Cause Supply Curves to Shift? Number of Sellers: –More or fewer sellers enter the market Seller Expectations for Future Prices: If sellers expect prices to increase or decrease in the future it will affect how much they are willing to supply. Weather (in some cases) –Can affect the supply of a good