1. Supply A relation showing the quantities of a good producers are willing and able to sell

2. Law of Supply Producers offer more of a good as its price increases and less as its price falls Ceteris Paribus – all other things held constant Assumption: producers try to maximize profits and this goal motivates the behavior of suppliers

3. Role of Profits Profit = Total Revenue minus Total Costs Unknowns: ▫Consumer demand ▫Resource availability ▫Intentions/goals of other firms in the market

4. Elasticity of Supply A measure of the way suppliers of goods and services respond to a change in price

5. Elastic Supply Supply that is very sensitive/responsive to changes in price ▫Drycleaning service  If price of drycleaning increases it is easy to hire more workers and increase supply

6. Inelastic Supply Supply that is not sensitive - or cannot respond- easily to change in price ▫If the price of football tickets increases…  Stadium owners cannot increase the number of seats very easily

7. Time determines elasticity Short Run: ▫Firms may not be flexible  Apple growers  Car manufacturers  Electricity producers

8. Time determines elasticity Short Run ▫Window washers can easily increase supply  What other businesses can enter the market quickly or increase production quickly?

9. Time determines elasticity Long Run ▫Farmers – can’t change production quickly! ▫Manufacturers  Can only benefit as long as price stays high as they gear up to produce more