1. Supply and DeterminantsQ

2. Supply Producer’s side
A relation between the price of a good and the quantity that the producers are willing and able to offer for sale during a given period, other things constant.

3. Law of Supply
The quantity of a good supplied during a given period is usually directly related to the price of the good
Increase in price leads to increase in quantity supplied
Decrease in price leads to decrease in quantity supplied.
Creates upward sloping supply curve

4. Supply Curve 5 Price of Good Quantity Demanded $3 50 $4 75 $5 100 $6
150 $7
200 6
Supply 5
Quantity

5. Movement along the supply curve
A change in price and only in price
Causes a movement along the supply curve
Called a Change in Quantity Supplied
Supply $6 B $4 A
100
150

6. Supply Individual supply Market supply
The supply of an individual producer
Market supply
The sum of individual supplies of all producers in the market

7. Determinants for the Supply Curve
Changes in technology
Changes in prices of relevant resources
Changes in the prices of alternative goods
Changes in Producer Expectations
Changes in the number of producers

8. Changes in Supply
Caused by changes in the determinants to the supply curve
Results in changes to the relationship between the price and quantity supplied
At each and every price a different quantity is supplied
New supply curve - shift in supply

9. Increase in Supply
At each and every price more of the good is supplied S1 S2 $6
300
400

10. Causes of increase in Supply
Improvements in Technology
Changes in relevant resources
Decrease in the price of resources
Lowers costs
Changes in price of alternative goods
If price of alternative good increases, supply of the good increases
Changes in producers expectations

11. Changes in technology
Technology is the economy’s stock of knowledge about how to combine resources efficiently

12. Changes in Technology Improvements in technology
Causes an increase in supply
More of the product is available at all prices S1 S2 $6
300
400

13. Changes in Relevant Resources
Decrease in resource prices
Increases the supply of the good at each and every price. S1 S2 $6
300
400

14. Changes in prices of Alternative Goods
Other goods that use some or all of the same resources as the good in question
Beef and leather.
If the price of beef increases, producers will supply more beef thus increasing the supply of leather.
Price S1 S2 $6
Q Leather
300
400
Above is the market for the
supply of leather

15. Changes in Producers Expectations
Expectation of future prices of resources or their own product can cause producers to change what they offer at each individual price

16. Changes in the Number of Producers
As the number of producers change so does the supply of the product
A decrease in the number of producers will lead to a decrease in supply

17. Decrease in Supply
At each and every price LESS of the good is supplied 5 S1 S2
400
600

18. Causes of Decrease in Supply
Backward movement in Technology
Changes in relevant resources
Increase in the price of resources
Raises costs
Changes in price of alternative goods
If price of alternative good decreases, supply of the good decreases
Changes in producers expectations

19. Changes in Relevant Resources
Are those employed in the production of the good in question
Increase in price of resources
Results in decrease in supply
Less of the good is available at all prices $9 S1 S2
500
600

20. Changes in prices of Alternative Goods
Other goods that use some or all of the same resources as the good in question
Beef and leather.
If the price of beef decreases, producers will supply less beef thus decreasing the supply of leather.
Price S1 $6
Q Leather
300
400
Above is the market for the
supply of leather

21. Producer’s Expectation
Nationalization

22. Expropriation:
"occurs when a public agency (for example, the provincial government and its agencies, regional districts, municipalities, school boards, post-secondary institutions and utilities) takes private property for a purpose deemed to be in the public interest".