1. SUPPLY CHAPTER 21, SECTIONS 1-3

2. WHAT IS SUPPLY? Supply – the various quantities of a good or service that producers are willing to sell at all possible market prices Supply Schedule – a numerical chart that illustrates the law of supply Supply Curve – a graph that shows the amount of a product supplied at all possible prices

3. WHAT IS SUPPLY? Law of Supply – suppliers will normally offer more for sale at higher prices and less at lower prices Market Supply – the total supply schedules of all businesses that provide the same good or service

4. SUPPLY ILLUSTRATED

5. CHANGES IN SUPPLY Changes in the cost of resources Increase productivity – the degree to which resources are being used efficiently to produce goods and services Technology – the methods or processes used to make goods and services

6. CHANGES IN SUPPLY Changes in government policies – increased minimum wage, new regulations, etc. Changes in taxes or subsidies – a government payment to an individual, business or other group for certain actions

7. SHIFT IN SUPPLY Shift (decrease) in the supply of umbrellas

8. SUPPLY ELASTICITY Supply elasticity – a measure of how the quantity supplied of a good or service changes in response to changes in price Products that are easier to produce are supply ELASTIC – like kites, candy or Happy Meal toys Products that are hard to produce are supply INELASTIC – like diamonds

9. SUPPLY & DEMAND AT WORK Markets consist of all buyers and sellers of a product  combining the supply and demand curves creates a way to “look” at the market

11. SUPPLY & DEMAND AT WORK Surplus – quantity supplied is higher than the quantity demanded SURPLUS

12. SUPPLY & DEMAND AT WORK Shortage – quantity demanded is higher than the quantity supplied SHORTAGE

13. SUPPLY & DEMAND AT WORK The point where supply and demand achieve balance is the equilibrium price (market price)

14. SUPPLY & DEMAND AT WORK PRICE CONTROLS –Price ceiling is a gov’t-set max price for a good (rent) –Price floor is a gov’t set minimum price for a good (minimum wage)

15. SUPPLY & DEMAND AT WORK ADVANTAGES OF PRICE –Prices are neutral –Prices are flexible –Prices provide freedom of choice –Prices are familiar

16. Supply & Demand on the Move Read the following scenarios and, in partners, decide whether supply or demand or both will change. If they change (and something will change in each scenario), how? Increase? Decrease? Illustrate the change on the provided graphs. Finally, what will happen to the equilibrium price? 1.A company has an outbreak of flesh eating bacteria in their children’s breakfast cereal. What is likely to happen to the supply and demand for the competing cereal Happy Flakes? 2.The price of gas doubles. What is likely to happen to the supply and demand for bicycles? 3.The price of fish rises. What is likely to happen to the supply and demand at Red Lobster? 4.The shoe industry sees a 25% increase in the price of leather. What is likely to happen to the supply and demand of shoes? 5.A new pesticide is released which should help to kill off a type of insect that attacks orange groves. What is likely to happen to the supply and demand of oranges? 6.New study shows that pizza helps you lose weight. What is likely to happen to the supply and demand for pizza?