1. Chapter 5 Supply

2. Section 1 What is Supply ?

3. The Law of Supply Supply refers to the willingness and ability of producers to offer goods and services for sale. Anyone who provides a good or service is a producer. The law of supply states that producers are willing to sell more of a good at a higher price than they are at a lower price Price and quantity supplied have a direct relationship

4. Supply Schedules A supply schedule is a table that shows how much of a good or service an individual producer is willing and able to offer for sale at each price in a market. A Market supply schedule is a table that shows ofa good or service all producers in a market are willing and able to offer for sale at each price

5. Supply Curves A supply curve is a graph that shows how much of a good or service an individual producer is willing and able to offer for sale at each price A market supply curve is a graph that shows the data from the market supply schedule

6. Section 2 What are the Costs of Production?

7. Labor Affects Production Marginal product is the change in total product that results from hiring 1 more worker. Specialization is where workers focus on 1 particular skill and perfect that craft. A marginal product schedule shows the relationship between labor and marginal product schedule. If you have increasing returns that means each new worker adds more total output than the last, as shown by the marginal product. Diminishing returns is where each new worker causes output to grow but at a decreasing rate.

8. Production Costs Every business goal is to earn as much profit as possible Profit get from selling products once the mosey it costs to produce the product is taken out. Costs are expenses that a business owner incurs for whatever reason You have different types of costs : Fixed Costs – costs that occur whther a business makes profit or not Variable costs – costs that change with the level of production output changes Total Cost – If you add fixed and Variable costs together Marginal cost – additional cost of producing 1 more item

9. Earning the Highest Profit Before a business can decide how much to produce it must first figure its marginal revenue and total revenue Marginal revenue – added revenue per unit of outpu (money made from each additional item) Total Revenue – the income a business receives from selling a product. The goal is to reach your profit maximizing output where marginal cost and marginal revenue are equal.

10. Section 3 What Factors Affect Supply?

11. Changes in Quantity Supplied Change in quantity supplied is an increase or decrease in the amount of a good or service that producers are willing to sell because of a change in price. Each new point on the supply curve shows the change in quantity supplied Quantity supply change is shown by direction of the line

12. Change in Supply A change in supply occurs when something prompts producers to offer different amounts for sale at every price. There are 6 factors that effect the change in supply : 1. Input costs – price needed to produce a good or service 2. Labor productivity – Amount of goods or service that can be produced in an amount of time 3. Technology – application of scientific methods and new production processes

13. Change in Supply 4. Government action – If the government taxes specific items (excise tax) or if the government limits the production of goods in various ways (regulation) 5. Producer expectations – What the producers expect will happen to their product price wise in the future 6. Number of Producers – The increased number of producers means increase in competition

14. Section 4 What is Elasticity of Supply?

15. Elasticity of Supply Elasticity of Supply is a measure of how responsive producers are to price changers. If change in price leads to a LARGE change in quantity supply, supply is elastic If change in price does NOT lead to large change in quantity supply, supply is inelastic

16. What Affects Elasticity of Supply? Changing production to respond to price changes is the main factor that affects elasticity of supply The more time that passes the more elastic supply becomes