1. Chapter 3 Economics

2. SupplySupply amount of goods and services business firms are willing and able to provide at different prices

3. Law of Supply the higher the price, the greater the quantity of the product a supplier will produce

4. BusinessBusiness a seller of goods or services

5. supply schedule table of supply data

6. Supply curve line-graph of supply schedule information

7. 3000 1000 2000 4000.50 1.00.90 1.10 1.20.80.70.60 Supply Curve 5000.40

8. 3 1 2 4 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 Vertical graph

9. 30 10 20 40 $100 $200 $300 $400 $500 $600 Horizontal graph 5060

10. Change in quantity supplied when a change in price buyers will pay causes a change in the number of goods supplied

11. 3000 1000 2000 4000.50 1.00.90 1.10 1.20.80.70.60 Change in Quantity Supplied 5000.40.90.50

12. Change in Supply decrease in supplydecrease in supply leftward shift suppliers produce less at any given pricesuppliers produce less at any given price decrease in supplydecrease in supply leftward shift suppliers produce less at any given pricesuppliers produce less at any given price

13. Change in Supply increase in supplyincrease in supply rightward shift suppliers produce more at any given price increase in supplyincrease in supply rightward shift suppliers produce more at any given price

14. 3000 1000 2000 4000.50 1.00.90 1.10 1.20.80.70.60 Decrease in Supply 5000.40

15. 3000 1000 2000 4000.50 1.00.90 1.10 1.20.80.70.60 Increase in Supply 5000.40

16. Supply Shift Factors change in technology change in production costs change in price of related goods change in technology change in production costs change in price of related goods

17. Change in Technology improves tools used to produce goods and services improves production or reduces cost improves tools used to produce goods and services improves production or reduces cost

18. Change in Production Costs costs of natural resources, labor, and financial capital changes in these costs affect supply costs of natural resources, labor, and financial capital changes in these costs affect supply

19. Change in Price of Related Goods usually substitute goods shift production to the more- profitable good usually substitute goods shift production to the more- profitable good

20. Market Equilibrium Point price at which consumers are willing to pull out of the market the exact quantity of product that suppliers are willing to push in

21. 4000 1000 3000 5000.50 1.00.90 1.10 1.20 1.30.80.70.60 2000 6000 70008000 demand supply market equilibrium

22. Economies of Scale the more produced, the cheaper each product supply more with hopes that demand increases the more produced, the cheaper each product supply more with hopes that demand increases

23. surplus an excess of unsold products

24. Surplus Costs storage security & insurance of the goods spoilage of the goods loss of income interest costs of financing storage security & insurance of the goods spoilage of the goods loss of income interest costs of financing

25. Surplus Solutions 1)increase demand for the goods 2)decrease the supply 3)allow the price to fall to the equilibrium point 1)increase demand for the goods 2)decrease the supply 3)allow the price to fall to the equilibrium point

26. Surplus Solutions 1)increase demand for the goods first and best solution for the supplier produce a great quantity and charge a higher price “demand solution” 1)increase demand for the goods first and best solution for the supplier produce a great quantity and charge a higher price “demand solution”

27. 4000 1000 3000 5000 1.00.90 1.10 1.20 1.30.80.70.60 2000 6000 70008000 1.35 demand 1 demand 2 supply

28. Surplus Solutions 1)increase demand for the goods increasing tastes & preferences eliminate substitute goods establish price floors 1)increase demand for the goods increasing tastes & preferences eliminate substitute goods establish price floors

29. Surplus Solutions 2) decrease the supply cut production “supply solution” cut production “supply solution” problems = competition reaction

30. 4000 1000 3000 5000 1.00.90 1.10 1.20 1.30.80.70.60 2000 6000 70008000 1.35 demand supply 2 supply 1

31. Surplus Solutions increase demand decrease supply demand solution supply solution shifts the demand curve shifts the supply curve favored by suppliers

32. Surplus Solutions 3) allow the price to fall to the market equilibrium point the market does the work supplier = gradually lowers price buyer = purchases more at lower price surplus gone; price stops falling the market does the work supplier = gradually lowers price buyer = purchases more at lower price surplus gone; price stops falling

33. 4000 1000 3000 5000.90.80 1.00 1.10 1.20.70.60 2000 6000 70008000 1.30 1.40

34. Surplus Solutions 1)increase demand for the goods 2)decrease the supply 3)allow the price to fall to the equilibrium point 1)increase demand for the goods 2)decrease the supply 3)allow the price to fall to the equilibrium point

35. shortage caused by the price of a good being held lower than its market equilibrium price not enough of a good caused by the price of a good being held lower than its market equilibrium price not enough of a good

36. loss leaders products deliberately sold at a loss to lure in customers

37. Price Ceilings government restrictions on prices prevent prices from rising to equilibrium value always causes shortages government restrictions on prices prevent prices from rising to equilibrium value always causes shortages

38. Shortage Solutions 1)decrease demand 2)increase supply 3)allow the price to rise to the market equilibrium point 1)decrease demand 2)increase supply 3)allow the price to rise to the market equilibrium point

39. Shortage Solutions 1)decrease demand “demand solution” by discouraging demand for a product “demand solution” by discouraging demand for a product

40. 4000 1000 3000 5000.40.90.80 1.00 1.10 1.20.70.60.50 2000 6000 70008000 supply demand 1 demand 2

41. Shortage Solutions 2) increase supply “supply solution” by: managing supply improving technology boosting productivity “supply solution” by: managing supply improving technology boosting productivity

42. 4000 1000 3000 5000.30.80.70.90 1.00 1.10.60.50.40 2000 6000 70008000 supply 1 demand supply 2

43. Shortage Solutions decrease demand demand solution increase supply supply solution shifts demand curve shifts supply curve dangerous to suppliers focus on technology or production

44. Shortage Solutions 3) allow the price to rise to the market equilibrium point not imposing price ceilings benefits: encourages conservation and discourages wastefulness motivates entrepreneurs to enter the market not imposing price ceilings benefits: encourages conservation and discourages wastefulness motivates entrepreneurs to enter the market

45. 4000 1000 3000 5000.30.80.70.90 1.00 1.10.60.50.40 2000 6000 70008000 supply demand