1. Understanding Supply Economics

2. Economic Market Market: Any place where people come together to buy and sell goods or services An economic market has two sides: The buying side is referred to as demand The selling side is referred to as supply P = Price, Q = quantity,

3. What is Supply? The willingness and ability of sellers to produce and offer to sell different quantities of a good at different prices during a specific time period. Willingness refers to a sellers desire to sell Ability refers to a sellers capability to sell

4. What is Supply? Ex: Joe is willing to make and sells shoes. However, Joe does not know how (have the ability) to make shoes. Outcome: Joe cannot supply shoes

5. What is Supply? Push up scenario How many push ups are you WILLING and ABLE to do for $1 $2 $3

6. What is the Law of Supply? Law of Supply: A law stating that as the price of a good increases, the quantity supplied of the good increases, and as the price of a good decreases, the quantity supplied of the good decreases (direct relationship). If P up then Q s up If P down then Q s down

7. Quantity supplied The number of units of a good produced and offered for sale at a specific price. Ex: A seller offers five hot dogs at $2. Five is the quantity supplied at that price.

8. Supply Schedule A numerical chart illustrating the law of supply Notice the representation of the law of supply PriceQuantity Supplied 112 228 342 452 560

9. Supply Curve A graph that shows the amount of a good sellers are willing and able to sell at various prices Price is always on the vertical axis. Quantity supplied is always on the horizontal axis.

10. The Supply Curve Shifts When supply increases, the curve shifts right. When supply decreases, the curve shifts left.

11. Vertical Supply Curve This exists in a situation where there are a limited amount of a good or service Vertical supply curve indicates a change in price will have no effect on the quantity supplied. Ex: Theater tickets; stadium tickets, certain antiques 0 10 20 30 40 50 60 70 0 10 20 30

12. What Factors Cause Supply Curves to Shift? Weather: Ex: a hurricane wrecks sugarcane fields in the Caribbean. Therefore, the cost of sugar increases. Inputs (Resource Prices): Land, labor, and capital Government Taxes: Taxes on the per-unit costs (avg. cost of a good) increase or decrease Subsidies: A financial payment made by the government Quotas: A legal limit on the number of units of a foreign produced good (import) that can enter the country

13. What Factors Cause Supply Curves to Shift? Number of Sellers: More or fewer sellers enter the market Expectations of Future Prices: Prices are expected to increase or decrease Technology: The ability to produce more output with a fixed amount of resources

14. Change in Supply vs. Change in Quantity Supplied A change in supply refers to a shift in the supply curve. This can be brought on by 6 possible factors / shifters S1S1 S2S2

15. Change in Supply vs. Change in Quantity Supplied A change in quantity supplied refers to a movement along a given supply curve. This is brought on ONLY by a change in a good’s price S1S1 A B

16. Assignment Supply Headlines