Download Supply Ch 5

Supply
Law of Supply and
How Firms Make
Production Decisions
Law of Supply
• Higher the $- larger the quantity produced
• Quantity supplied- how much of a good is
offered at a specific price
• As price rises- firms produce more to
maximize profits. New firms enter market
• If price falls- production will decrease and
some firms will leave market.
Higher Production
• Supply-amount of goods available
• Increase production=profits if demand is
high
• No profit-raise price or make something
else
• Pizza-best production model pg 95 pizza
$2.00 a slice production @ 150
Market entry
• Music industry
• With changing styles and popularity in
music- we see increase in supply
• 1970’s- disco
• 1980’s-hair bands
• 1990’s-grunge
• Bands flooded market