1. ECONOMICS : CHAPTER 5-- SUPPLY
Producers– want to maximize profit
Firms try to transform resources into products that are of good quality and will be demanded by consumers

2. Total Revenue TOTAL SALES TOTAL $ AMOUNT RECEIVED FROM CONSUMERS
Total Revenue = Price * Quantity sold at that price

3. TOTAL COST
Total cost of ALL resources used by the firm to produce a good or service

4. PROFIT = TOTAL REVENUE – TOTAL COST

5. BREAK-EVEN POINT
When total revenue just covers total cost.

6. Profit Incentive
Leads Entrepreneurs to accept the risk of business failure

7. SUPPLY
How much of a good PRODUCERS are willing and able to offer for sale per period at each possible price

8. LAW OF SUPPLY Quantity supplied varies directly with price.
Price Quantity supplied
Price Quantity supplied

9. Producers offer more for sale when the price increases because it is more profitable.
A higher price makes producers more willing and better able to increase quantity supplied.

10. Quantity Supplied
A particular amount offered for sale at a particular price

11. Price decrease
Producers become less willing and less able to supply goods

12. ELASTICITY OF SUPPLY
Indicates how responsive producers are to a change in price.
Elasticity of supply is typically greater the longer the period of adjustment.

13. CHANGE IN COST
A change in the cost of a resource used to make a good will affect the supply of the good
Example: If soybean farmers expect the price of soybeans to decrease soon, they would most likely decrease the production immediately.

14. Determinants of Supply
The cost of resources used to make the good
The prices of other goods these resources could make
The technology used to make the good
Producer expectations
The number of sellers in the market

15. Categories of Resources
Fixed: can’t be altered easily
Example: size of building
Variable: can be varied quickly and change output

16. Law of Diminishing Return
Most important feature of production in the short run
Example: adding an extra worker doesn’t increase production

17. Costs in the short run
Can face both variable and at least one is fixed.
In the long run all resources can be varied

18. Marginal Revenue
Producers sell additional units as long as the marginal revenue they receive exceeds the marginal cost
In a competitive markets: a firm’s marginal revenue is the market price
If a firm’s marginal revenue exceeds it marginal cost it should increase its production

19. Minimum Acceptable Price
A price high enough to ensure that total revenue at least covers variable cost.