1. Module 6 Feb 2015

2.  Quantity supplied – the actual amount of a good or service producers are willing to sell at a specific price  Supply schedule shows how much of a good or service producers will supply at different prices  Supply curve – shows the relationship between quantity supplied and price  Higher price generally leads to higher quantity supplied. Supply has an upward sloping curve

3.  Law of supply – other things being equal, the price and quantity supplied of a good are positively related.  Change in supply – a shift of the supply curve which changes the quantity supplied at any given price (ex: more producers)  Movement along the supply curve – a change in the quantity supplied of a good that is the result of a change in that good’s price.

4.  Candy at.30 – 25,.50 – 100 pieces, at.75 – 200 pieces, at 1.00 – 300 pieces Price of Candy per pieceQuantity of candy supplied - pieces 1.00300.75200.50100.3025

5.  An increase in supply means a rightward shift of the supply curve  A decrease in supply means a leftward shift of the supply curve  Changes in input prices  Changes in the prices of related goods or services  Changes in technology  Changes in expectations  Changes in the number of producers

6.  Input prices – inputs are anything used to produce a good or service, if the price of an input changes, the price to produce the good or service changes, also.  Prices of Related Goods or Services – Say a farmer raises chickens and goats…if the consumers demand more chickens than goats, then the farmer may choose to raise more chickens, this is a substitute in production.

7.  Since the farmer is raising chickens, a by- product of that is either eggs or fertilizer or both. Because the farmer now has more than one product and each is supplied at any given price, these by-products are complements in production.  Technology – this doesn’t have to be super- duper technology, it could be a better ice cream scoop for a Baskin-Robbins…anything that allows for faster or greater production

8.  Expectations – when suppliers have some choice about when they put their goods up for sale ◦ Ex: Water skis and snow skis – a company makes both but focuses supply seasonally ◦ Ex: A company may choose to supply a limited amount of goods during September and October, but then release a stockpile during November and December.

9.  Individual supply curve illustrates the relationship between the quantity supplied and price for an individual producer  Market supply curve illustrates the total quantity supplied from all the individual producers

10.  Equilibrium – an economic situation is when no individual would be better off doing something different  Competitive Market is in equilibrium when price has moved to a level at which the qty demanded of a good equals the qty supplied  The price at which this takes place is Equilibrium Price (Market-Clearing Price)  The qty of the good bought and sold at that price is Equilibrium Quantity

11.  Equilibrium price – occurs in an established market where lowering the price doesn’t make sense when the seller can get the same price as every other seller.  Surplus – when the qty supplied exceeds the qty demanded. This occurs when the price is ABOVE its equilibrium level.  Shortage – when the qty demanded exceeds the qty supplied. This occurs when the price is BELOW its equilibrium level.

12.  Module 6 Review Questions  Bade and Parkin – page 108, questions 1-6