1. Microeconomics – Unit 2 Supply Part 3

2. Law of Supply Quantity supplied rises as price rises, & quantity supplied falls as price falls, other things constant.

3. P Q S 255075100 $5.00 $9.00 $11.00 $7.00 Supply curve is ________________ sloping. There is a ________________ relationship between price and quantity supplied. direct upward

4. P Q S 255075100 $5.00 $9.00 $11.00 $7.00 Qs – refers to the specific amount that will supplied at a specific price. S – refers to a schedule of quantities a seller is willing to sell at various prices, other things constant.

5. P Q S 255075100 $5.00 $9.00 $11.00 $7.00 Qs is just a point on the curve S is the entire curve  P changes ____________________  P does NOT change _______________ quantity supplied supply

6. What accounts for law of supply? As price rises, individuals & firms __________________________________in order to supply more of that good. As price of a good rises, the ______________________ of NOT supplying that good rises. As price of a good rises, the expectation of higher ___________ causes a firm to increase output. 1. 2. profits opportunity cost rearrange their activities

7. Six variables that shift Supply R O T T E N resources -- costs & physical availability other goods prices – substitutes in production number of suppliers expectations of suppliers taxes & subsidies technology

8. New technology helps Bath and Body works turn out double the amount of smelly hand creams. What happens to P & Q of hand creams? P Q S D P Q S1 P1 Q1 hand creams

9. Kinsinger’s Kows noticed that the price of butter has been climbing recently with no end in sight. What happens to P & Q of cheese? P Q S D P Q S1 P1 Q1 cheese

10. Elements of an acceptable IB / AP graph Q S D P Q P1 Q1 High-Definition TV’s no arrow to show shift of D curve D1 not labeled y axis not labeled What three required elements are missing from the following graph?

11. Elements of an acceptable IB / AP graph Q S D P Q P1 Q1 no arrow to show P lowers to P1 no dotted lines to new P1 & Q1 market not labeled What three required elements are missing from the following graph? P D1

12. P Q S D P Q The government subsidizes the cost of construction of roads into National Forests. Show what happens to P & Q for lumber. lumber

13. P Q S D P Q Three more T-shirt vendors have opened up shop in Chandler hoping to print T-shirts for the local schools. T-shirts What happens to the P & Q of T-shirts?

14. P Q S D P Q Prices of calculators continue to fall at a lightening pace. calculators the end What happens to the P & Q of calculators?