1. Chapter 5: Demand and Supply Supply and Shifters of Supply

2. Term Review  Demand  Demand Schedule  Demand Curve  Income Effect  Substitute Effect  Law of Diminishing Marginal Utility  Substitute Good  Complementary Good

3. Supply  Willingness and ability of sellers to produce and sell goods and services  Key Assumption applied to a single supply curve  Ceteris paribus – all other things being equal  The only variable that changes is price  Costs are held constant

4. Quantity supplied versus Supply  Supply refers to the willingness and ability to supply at each and every price  Quantity Supplied refers to the amount that producers are willing to supply at a specific price

6. Supply Schedule PriceQuantity Supplied $0.502 $1.005 $1.508 $2.0011 $2.5014

7. Law of Supply  What did you notice about the relationship between price and quantity supplied?  State the Law of Supply in your own words

8. Law of Supply  As the price goes up, quantity supplied increases  As the price goes down, quantity supplied decreases  Think:  Profit Motive. Sellers want more Revenue  Profit = Total Revenue minus Total Costs  Higher prices increase total revenue  There is a direct or positive relationship between price and quantity supplied.  The Supply Curve is upward-sloping

9. Movement versus Shifts along the Supply Curve  Review: What caused movement along the demand curve?  The same thing will cause movement along the supply curve.  Market Supply is the sum of all sellers in a market

10. Movement along the Supply curve

11. Shifts in the Supply Curve

12. What causes shifts in the Supply Curve?  Change in the cost of inputs  Change in the number of producers  Natural disasters or major International Events  Changes in Technology  Changes in Producer Expectations  Changes in Government Policy