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Economics Unit 4 Supply Supply • Supply refers to the various quantities of a good or service that producers are willing to sell at all possible market prices • The Law of Supply is the principle that suppliers will normally offer more for sale at higher prices and less at lower prices Supply • A supply schedule is a table showing quantities supplied at different possible prices. • A supply curve is a graph showing the quantities supplied at each possible price. • Market Supply describes the combination of supply schedules for all businesses that provide the same good or service Elasticity • A product for which quantity changes a great deal when prices go up or down is said to be supply elastic • Supply elasticity measures how the quantity supplied changes in response to price changes. • A product for which quantity changes very little when prices go up or down is said to be supply inelastic Products and Profits • Price helps answer what to produce, how to produce, and for whom to produce. • A shortage is the amount by which the quantity demanded is higher than the quantity supplied. Products and Profits • Price ceiling refers to the government-set maximum price that can be charged for goods and services • A surplus is the amount by which the quantity supplied is higher than the quantity demanded. Products and Profits • Profit is the money a business receives for its products or services over and above its costs. • Productivity is the degree to which resources are used efficiently to produce goods and services. • Technology refers to the methods or processes used to make goods and services Government Interaction • Higher taxes mean higher costs, which cause a decrease in supply. • In general, when government regulations get tighter, supply is restricted. • Subsidy is the term for a government payment to an individual, business, or other group for certain actions Supply and Demand • A price floor is a government minimum price that can be charged for goods and services. • The equilibrium price is the point at which there is neither a surplus nor a shortage.
