SUPPLY Warm UP 1. All of the following can cause an increase in supply except: A decrease in the cost of input b. fewer sellers in the market place An increase in productivity d. a change in taxes or subsidies The supply curve is Downward sloping b. level Upward sloping d. irregular The Law of Supply states that The quantity supplied varies inversely with its price The quantity supplied varies irregularly with its price The quantity demanded varies inversely with its price The quantity supplied varies directly with its price 4. What product is likely to have the MOST elastic supply curve? Ice cream cones b. automobiles c. Ships d. dishwashing machines

Price Elasticity of Supply Price elasticity of supply (PES) measures the relationship between change in quantity supplied following a change in price Price elasticity of supply If supply is elastic (i.e. PES > 1), then producers can increase output without a rise in cost or a time delay If supply is inelastic (i.e. PES <1), then firms find it hard to change production in a given time period.

Calculate the PES PES 1. 2. 3. 4. 5. 6. 7.