1. Supply

2. Supply What is SUPPLY? What is the Law of Supply?
Supply is the quantities of a good that sellers or firms are willing and able to produce and sell (now).
What is the Law of Supply?
All else being equal, quantity supplied of a good rises, as the price increases.
Why? Because, at higher prices profit seeking firms have an incentive to produce more.

3. Example of Supply Supply Schedule
You own an lawn mower and you are willing to mow lawns.
How many lawns will you mow at these prices?
Price per lawn mowed
Quantity
Supplied
Supply Schedule $1 $5
$20
$50
$100
$1000 3

4. 5 Shifters of Supply Input Prices Technology Expectations
Taxes & Subsidies
Number of Sellers
Subsidies
It is government payment to support business or market. Subsidies cause the supply of a good to increase.
Changes in PRICE
Stay on the Line

5. Input Prices
Input Price  Q.S.

6. Technology
Technology  Q.S.

7. Expectations
(now)
Expect Price  Q.S.
(now)

8. Taxes & Subsidies
Taxes  Q.S.
Subsidy  Q.S.

9. Number of Sellers
# of Sellers  Q.S.

10. If gas price goes from $4. 99 down to $2
If gas price goes from $4.99 down to $2.05, what is going to happen to the gas supply?
Price
Quantity

11. Shift in Supply Increase in Supply Decrease in Supply Price Quantity

12. Supply Headlines Worksheet

13. Supply Practice
First, identify the determinant (shifter) then decide if supply will increase or decrease
Shifter
Increase or Decrease
Left or Right 1 2 3 4 5 6
Number of consumers, increase.
Income, decrease.
Substitutes, decrease.
Price doesn’t shift curve, no change.
Tastes and preferences, decrease.
Expectations, increase.
Complements, decrease. 13 13

14. Supply Practice Hamburgers Mad cow disease kills 20% of cows
Which Determinant (shifter)?
Increase Or Decrease?
Which Direction Will Curve Shift?
Hamburgers
Mad cow disease kills 20% of cows
Price of hamburgers increase 30%
Government taxes burger producers
Restaurants can produce burgers and/or tacos. A demand increase causes the price for tacos to increase 500%
New bun baking technology cuts production time in half
Minimum wage increases to $20
Decrease in availability of resources, decrease.
Price doesn’t shift curve, no shift.
Government action, decrease.
Opportunity cost of alternative production, decrease.
Technology, increase.
Price of resources, decrease.