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WHAT IS SUPPLY? Chapter 5, Section 1 WARM-UP: If you owned a store, how would you decide how much product to supply in your store at any given time and why? LAW OF SUPPLY Suppliers will normally offer more for sale at high prices and less at lower prices. Imagine you are the Manager of Best Buy – you will make more profit on higher priced items so you make more available at higher prices. Supply – the amount of a product that would be offered for sale at all possible prices that could prevail in the market. Supply schedule – a listing of the various quantities of a particular product supplied at all possible prices Supply curveA graphical representation of the supply schedule showing various quantities supplied at each and every price Supply Schedule & Curve Market supply curve – the supply curve that shows the quantities offered at various prices by all firms that offer the product for sale (Ex. Best Buy & Apple store) Quantity supplied – the amount that producers bring to market at any given price Change in quantity supplied – the change in amount offered for sale in response to a change in price. CHANGEs IN SUPPLY A situation where suppliers offer different amount of products for sale at all possible prices in the market. What causes these changes: Cost of Inputs – If cost of inputs lowers, they supply more. If cost of inputs raises, they supply less. Productivity – If they make more in same time frame, they supply more. If they make less, they supply less. Technology - new technology lowers cost of production and increases productivity = increase in supply Taxes and subsidies – A subsidy is a government payment to an individual, business or other group to encourage or protect a certain type of economic activity Expectations If producers think their price will go up, they will withhold supply If they predict lower prices in the future then they will increase supply Government Regulations - increased regulations vs. relaxed regulations Number of Sellers- the more sellers that enter the market, the more quantity is supplied Supply Elasticity Measure of the way in which quantity supplied responds to a change in price Elastic Inelastic Unit Elastic Determinants: if a firm can adjust to new prices quickly then supply is elastic If adjustments take longer then supply is likely to be inelastic NO SIMILARITY WITH DEMAND ELASTICITY!!!!!!!!!
