1. Supply

2. Quantity Supplied Amount of any good or service that sellers are willing and able to sell Law of Supply: Other things equal (ceteris paribus), when the price of a good rises, the quantity supplied of the good also rises, and when the price falls the quantity supplied falls.

3. Market vs. Individual Supply Sum the individual supply curves to obtain the market supply curve

4. Shifts in Supply 1. Input Prices: If price of an input rises, producing the item is less profitable and the firm supplies less 2. Technology: Innovation reduces labor needed and reduces costs thus the firm supplies more

5. Shifts in Supply (cont.) 3. Expectations: If a firm expects price to rise, it will supply less to the market today 4. Number of sellers: self explanatory – more sellers = more supply

6. Equilibrium Point where supply and demand curves intersect Creates equilibrium (or market-clearing) price and equilibrium quantity where both buyers and sellers are satisfied

7. Shortage vs. Surplus Surplus = Market price is above equilibrium price so there is too much being supplied… price will fall until equilibrium Shortage = Quantity demanded is greater than quantity supplied; market price is below equilibrium price… price will rise to equilibrium

8. Shifts affecting Equilibrium Does it shift Demand or Supply or Both?