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Understanding Supply
Economics
1) The Law of Supply states that the higher the price of a good, the ________
the quantity produced. Conversely, if the price of a good falls, __________
of the good will be produced.
The Law of Supply is the opposite of the Law of Demand.
As
Prices
Rise
As
Prices
Fall
Supply
__________ but
Demand
______________
_
Supply
_______
but
Demand
_______
Is this logical that price affects suppliers and consumers differently?
_____________________
Explain your answer.
________________________________________________________________
________________________________________________________________
2) As price increases, current suppliers supply ________ to increase profits and
new companies _________ the market to make money.
Give two examples of the Law of Supply:
(Think music and movies!)
___________________________________________________
___________________________________________________
3) In the space below make a market supply schedule for pizza:
Price of Pizza Slice:
Quantity Supplied:
4) Convert your market supply schedule into a supply curve.
Price
Quantity
5) Additional Questions:
A- Why does a supply curve always rise from left to right? ______________
______________________________________________________________
B- In which direction does a demand curve rise or fall? Why? ____________
_______________________________________________________________
C- Define elasticity of supply. ______________________________________
_______________________________________________________________
D- Provide an example of a good that has inelastic supply. _______________
Why? _________________________________________________________
E- Provide an example of a service that has elastic supply. _______________
Why? _________________________________________________________