9-14 Law of Supply

BIG Ideas Explain how the incentive of greater profit affects supply. Describe the relationships that the supply curve shows.

Law of Supply Supply – the willingness and ability of producers to provide goods and services at different prices

Law of Supply Price goes up… quantity goes up Price goes down… Quantity goes down

Incentive of Greater Profit The higher the price of a good… the greater the incentive is for a producer to produce more. Supply will continue to increase until… Law of Diminishing Return – eventually the cost (in factors of production) of increasing supply will catch up with your profit However – if prices increase and demand stays the same … profit will continue

Supply Curve Amount supplied Price

Equilibrium Price Equilibrium Price – price at which the quantity demanded and quantity supplied are equal

4 Determinants of Supply 1) Price of Inputs drops dramatically supply curve shifts to the right

4 Determinants of Supply 2) Technology improvement in supply will increase the supply curve to the right

4 Determinants of Supply 3)Number of Firms in the Industry When more firms enter the industry, the supply curve shifts outward to the right

Determinants of Supply 4) Taxes If the gov’t imposes more taxes on businesses – they can’t supply as much and the supply curve shifts to the left

Shortages and Surpluses of Supply Shortages – prices will go up Surpluses – prices will go down

Assignment Due Friday (9-16) On page 204: Do the “Use terms from the following list to fill in the blanks in the paragraph below” section of Identifying Key Terms (1-6) On page 204: Do Recalling Facts and Ideas #’s 1, 4, 7, 8, 10, 12, 13