1. The Supply Curve
AP Econ

2. Warm Up
Let’s say you were making cookies to sell to people at school. How many would you be willing to sell at each price below? $.10, $.25, $.50, $1.00, $2.00, $5.00, $10.00

3. Supply
A schedule or curve showing the various amounts of a product (resource) that producers (owners) are willing AND able to make available for sale at each of a series of possible prices during a specific period of time.

4. Law of Supply
As the price rises, the quantity supplied rises. As the price falls, the quantity supplied falls.
Price and quantity are directly related

5. Supply Curve and Schedule
Price Quantity
supplied 5 60 4 50 3 35 2 20 1

6. Market Supply 20 31 15 22 10 17 5 12 = + + Similar to market demand
The sum of the individual supply curves for a particular product (resource)
Firm A Firm B Firm C
Quantity
Price supplied
Quantity
Price supplied
Quantity
Price supplied
Price Quantity supplied (market) 20 10 15 9 8 5 7 20 12 15 7 10 5 3 20 9 15 7 10 4 5 2 20 31 15 22 10 17 5 12 = + +

7. Change in QUANTITY supplied: movement along the supply curve
Largely due to changes in price
Change in supply: shift in the supply curve (increase or decrease)
To the right for an increase
To the left for a decreasezz

8. Factors Affecting Supply (Determinants)
Cost of inputs: if costs are high, supply decreases
Changes in prices of related goods/services
Ex: Bakeries that sell cookies and pies. Price of pies increases  supply of cookies falls
Ex: Wheat and straw. Increase in price of wheat  inc in quantity supplied of wheat  inc in supply of straw (complement in production)
Technology/motivation:
Better technology = more efficient production = increase supply
Taxes and subsidies: Increase in taxes = increase in costs  lower supply
Subsidies: govt payment to encourage a specific economic activity (ex. Farmers)

9. Factors Affecting Supply (Determinants)
Producer expectations
Government regulations: Scenario-the govt forces car manufacturers to update safety features  decrease supply
Number of sellers: as more firms enter the industry, the market supply will increase

10. Supply Shift Practice
Product: French fries. Scenario: The cost of fry grease has increased.
Product: cigarettes. Scenario: The government imposes a higher tax on producers because of the unhealthful nature of the product.
Product: heavy jackets in July. Scenario: Winter is coming, and outerwear producers know that many people will want to buy jackets in a few months.
Product: gingerbread men. Scenario: The machine that put the candy face on the little dude has malfunctioned, and now workers have to do it by hand.