1. Questions for thought….. After reading the article on OPEC, answer the following questions…. 1.Describe two factors which drive OPEC”S decision to decrease supply. 2.Explain the effect that global demand has on OPEC’s supply production.

2. Understanding Supply In this lesson, students will be able to… 1.Explain the law of supply. 2.Identify and describe a supply curve. 3. Contrast elastic and inelastic supply.

3. Look carefully at this graph. How does price influence supply?

4. Law of Supply The Law of Supply is the tendency of suppliers to offer more of a good at higher prices. Sellers love high prices. The Law of Supply is the opposite of the Law of Demand.

5. Look carefully at the curves. Do you notice that they move in different directions? Why?

6. Why do suppliers love high prices?

7. Why is the Law of Supply True? Supply increases as price rises because either existing firms will produce more to make greater profits… Or new firms will enter the market to take advantage of the high prices. Sellers love to make profits.

8. It’s hard to find vinyl records anymore. Suppliers prefer selling Compact Discs. Suppliers go where the higher prices are.

9. A Supply Curve A supply curve is a graphic representation showing the tendency of suppliers to supply more at higher prices. A supply curve will always rise left to right. Suppliers supply more at higher prices.

10. Notice how the supply curve rises left to right.

11. Supply moves in the direction of price.

12. Test your skill… Is the graph a supply or demand curve?

14. Elasticity of Supply Like Demand, Supply can be elastic or inelastic. In general, supply tends to be initially inelastic because it takes time to increase supply. However, some goods are more elastic than others.

15. Apples tend towards inelastic supply. It takes time to grow apples.

16. The supply of haircuts can be increased more easily.

17. Questions for Reflection: How does the Law of Supply differ from the Law of Demand? Why does supply increase as price increase? Why does it take time to increase supply?