Supply Chapter 4

Supply Supply – willingness and ability of sellers to produce and offer a good or service Supply = Willingness and ability to produce AND sell

Law of Supply IF price INCREASES then quantity supplied INCREASES IF price DECREASES then quantity supplied DECREASES These factors are the definition of a direct relationship »Moving in the same direction

Supply / Quantity Supplied Supply refers to the willingness and ability of sellers to produce and offer a good or service Quantity Supplied – the number of units of a good produced and offered at a certain price

Supply Schedule A numerical chart that illustrates the law of supply i.e.: –Price goes from 1 dollar to 2, then 3, then 4 –Quantity supplied goes from 10 to 20 to 30 then finally 40 for 4 dollars

A Supply Curve A line on a chart sloping from left to right showing the relationship of price and quantity supplied »Pg. 93

Vertical Curve The law of supply does NOT ALWAYS hold true Goods that aren’t produced anymore »Violins from a dead guy No time to produce more units »Tickets to an event

Section 2 What does it mean when a supply curve shifts to the right?

What does it mean when the curve shifts to the right or left? Supply increases > Supply curve shifts to the right Supply decreases > Supply curve shifts to the left

Factors of Shifts Resource prices Taxes Technology improvements Subsidies Quotas Number of sellers Weather

Resource Prices The falling and rising of resource prices 4 factors of production / resources »Chapter 1 i.e. > wage rates at car manufacturer rises, less cars will be produced

Technology Technology – body of skills and knowledge relevant to the use of resources in production Advancement in Technology – produce more output with fixed amounts of resources »Farming / Pesticides and Fertilizer Per Unit Cost – average cost of production

Taxes “extra cost” of doing business –Could cost the curve to shift to the left

Subsidies Financial payment made by the government for certain actions –Extra payment on output

Quotas Restrictions on the number of units from a foreign country that can be imported –Removing, lowering, or raising quotas can have various effects

Number of Sellers The number of people producing and selling a good can have drastic effects on the curve

Weather Agriculture