2. SUPPLY I want to wrap it all up in my pocket. It’s my bar of chocolate… GIVE IT TO ME NOW!

3. What is it? The amount of goods or services for sale at a particular price. The amount of goods or services for sale at a particular price. Breakdown: The lower the price the less product…the higher the price the more goods and services offered. Breakdown: The lower the price the less product…the higher the price the more goods and services offered.

4. The LAW of Supply The quantity offered varies directly with the price offered. The quantity offered varies directly with the price offered. 1. Higher price allows for greater output 2. Less efficient producers will join the game because the increased price will allow them to produce

5. Da Graphs There are Supply Schedules too. These Schedules can be graphed! Yahoo! The slope is upward and to the right!

6. Elasticity of Supply Just like demand, supply is sensitive or insensitive to price changes. Just like demand, supply is sensitive or insensitive to price changes. Elastic = Change in price causes larger change in supply Elastic = Change in price causes larger change in supply -Candy, Cheeseburgers Inelastic = Change in price causes smaller change in supply! Inelastic = Change in price causes smaller change in supply! -Milk, Oranges

7. You want how much for that? You can’t always get what you want. You can’t always get what you want. The price at which goods or services may actually be bought or sold is the MARKET PRICE (Equilibrium price) The price at which goods or services may actually be bought or sold is the MARKET PRICE (Equilibrium price)

8. Is this Paradise? NO! It is just a model of pure competition. 1. All buyers work independently and are too small to influence markets alone. 1. All buyers work independently and are too small to influence markets alone. 2. Competing products are practically identical. 2. Competing products are practically identical. 3. All buyers have full knowledge of all price quotes. 3. All buyers have full knowledge of all price quotes. 4. Buyers and sellers can enter and leave the market at will. 4. Buyers and sellers can enter and leave the market at will.

9. How much for a side of ribs? What we know What we know -When price goes up supply goes up. -When price goes up demand goes down. -There will be a point at which the two are equal. The price at which sales take place is the price at which the amount demanded is equal to the quantity supplied. The price at which sales take place is the price at which the amount demanded is equal to the quantity supplied.

10. Market Prices perform two important economic functions: Ration scarce resources. Motivate Production

11. $2.50…That’s it? The equilibrium/market price is the ONLY price. Can’t afford it? You will leave the market. Won’t sell for that cheap? You will leave the market. The market will drive you to equilibrium price even if you are willing to act at another price.

12. What happens to market price if there is a change in supply or demand? A change in demand varies directly with a change in market price. A change in supply varies inversely with the change in market price.

13. Supply schedule for Ice cream cones Price per cone Price per cone.50.50.75.75 $1.00 $1.00 $1.25 $1.25 $1.50 $1.50 $1.75 $1.75 $2.00 $2.00 Quant. Supplied 50 80 125 175 235 265 300

14. When it’s time to change…it’s time to rearrange… When the determinants of supply change, it will cause a similar change in the supply curve.

15. The following changes can affect the quantity supplied… Determinants of Supply Determinants of Supply –1.Price of Resources »Oranges for Minute Maid –2.Government Tools »Taxes, subsidies, regulations –3.Technology –4.Competition –5.Prices of related goods –6.Producer Expectations

16. Supply and Demand Schedules can tell us… How many items buyers will purchase and how many items sellers will offer at different prices. How many items buyers will purchase and how many items sellers will offer at different prices.

17. BUT they DO NOT tell us… At what price goods or services would actually change hands. At what price goods or services would actually change hands. What is the best price to sell at and what is the best price to buy at. What is the best price to sell at and what is the best price to buy at. Law of Diminishing Marginal Utility Applies here too! Law of Diminishing Marginal Utility Applies here too!