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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? _________________________________________________________
