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Supply
the other side of a market
Reference 4.1-4.3
What kinds of goods and
services are supplied?
Where there is demand, there is
supply.
SUPPLY

THE WILLINGNESS AND ABILITY TO
PRODUCE AND SELL A GOOD OR
SERVICE.
Law of Supply

As the price of a good increases, the
quantity supplied of that good increases.

As the price of a good decreases, the
quantity supplied of that good decreases.
Does this sound familiar???
Compare the Law of Supply with the Law of Demand

Discuss with your partner the similarities
and differences of the two laws.
• Law of Demand, an inverse relationship
between price and quantity demanded.
• Law of Supply, a direct relationship between
price and quantity supplied
Supply Schedules and Supply Curves
Apples
Price
Quantity Supplied
$.40
1000
$.60
2000
$.80
3000
$1.00
4000
Typical supply curve: Upward Sloping—a direct relationship
An exception to the Law of Supply:
A Vertical Supply Curve

Goods that can no longer be produced
– Stradivarius Violins
– Art works
– Antiques

When there is no time to produce more.
– Sold-out concert tickets
Consider 2 high schools

NothingFancy H.S.
– Students don’t get
paid for A’s.

BigBucks H.S.
– Students get paid
$50.00 for each A.
At which high school would you expect to see more A’s?
How does your answer relate to the Law of Demand?
Supply Curves Shift

Shift to the right
– Producers will supply
more of the good at all
prices

Shift to the Left
– Producers will supply
less of the good at all
prices.
Supply increase
Supply decrease
Factors that Can Cause a Supply Curve to Shift
Resource Prices
 Technology
 Government Action

– Taxes
– Subsidies
– Quotas
Number of Sellers
 Weather

Resource Prices

Resource Prices rise, producers will supply
less

Resource Prices fall, producers will supply
more
Technology

Advancement in technology (skills and
knowledge relevant to production)
– lowers the cost of production
– uses other resources more efficiently
Government Actions
Taxes – Some can increase per-unit costs
(left shift)
 Subsidies – Government payments for
certain actions.
(right shift)


Quotas – government restrictions on
production, especially imports
(left shift)
Number of Sellers. More sellers…

shift supply curve to the . . .
right

Elastic supply = %change Qs > %change P

Inelastic Supply = %change Qs < %change
price

Unit elastic Supply = %change Qs = %change
price
Homework:

Read and answer the questions,
p. 100/101
– “The Beatles”
– “Taxes, Tariffs & America’s Great Depression”

Complete Section Review, p. 103
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