1. Understanding Supply Today you will: 1.Explain the law of supply. 2. Interpret a supply graph using a supply schedule. 3. Explain the relationship between elasticity of supply and time.

2. A. The Law of Supply 1. Supply-the amount of goods available. 2. According to the law of supply, the higher the price, the higher the supply. A. Entrepreneurs wish to maximize profits, and so they are willing to supply more goods and services to the consumer at the highest available price.

3. B. The Supply Schedule 1. The supply schedule shows the relationship between price and the quantity supplied for specific goods and services. PriceSupply 1.00 1 2.00 2 3.00 3 4. 00 4 5.00 5

4. C. The Supply Graph 1. When the data from a supply schedule is graphed it is called a supply curve. 2. The key feature to a supply graph is that it always rise from the lower left hand side to the upper right hand side.

5. The Supply Curve 5 4 3 2 1 0 1 2 3 4 5 The Supply graph looks like a giant arrow. This differs from the demand graph that looks like a right triangle.

6. D. Elasticity of Supply and Time 1.What does elasticity mean? a- It refers to demand or supply having the ability to change or move. b. The more elastic it is, the more change there is.

7. 1. To determine if there will be an easy change in supply, (or if supply is elastic) time is a key factor. A. In the short run, a firm cannot easily change its output level, and so supply is inelastic. B. In the long run, firms have enough time to implement changes, so supply is more elastic.