Economics
Chapter 5.1 : The Law of Supply
Economics is the study of choices. Just
as Tom Hanks had to make economic
choices (build a house or a boat), and
consumers make choices (which
products they are willing and able to
demand), so to business must decide
how much of a product to supply
Agenda for Today
• 5.1 Law of Supply Slide Show
• Homework
–Complete Worksheet
Chapter 5, Lesson 1
Let’s Review
What is Supply?
• Supply
– Ability and willingness of
a producer to provide
things for sale
• Supply is not the physical
amount ready for sale
• It is the point at which a
seller is willing and able to
supply
• Law of Supply
– belief that as the price of
a good rises, the
quantity supplied will
rise
Would Mr. Krabbs “supply” Krabby Patties with
sea cheese if it cost him $1.75 to produce it?
Explain.
• The more $ Mr. Krabb can
get, the more he is willing What if the price rose to $2.00 for a Krabby Patty
to “supply”
with sea cheese?
What is a Supply Schedule?
• Supply Schedule
• Way to show the
law of supply using a
chart
• Use the Supply
Schedule to answer
the following
questions
– Suppose Mr. Krabb
decides to sell ice
cream cones.
Why is he unwilling to supply cones at $.50?
What is the Supply Curve?
• Supply Curve
– Illustrates the
behavior of the
seller
– Shows quantity
the seller is
willing and able
to provide at
each possible
price
How many pizza’s would Mr. Krabb be willing
to supply at $1?
How many at $4?
How much will a change in price affect supply?
• Elasticity of Supply
– How changes in price affect
the quantity of supply
• Elastic Supply
– When a change in price has
a big effect on the quantity
supplied
• American Flags after
9/11
– Patriotic Americans
willing to pay more
for flag
– As price rose, supply
rose
What is inelastic supply?
• Inelastic supply
– When a change in price
has very little effect on
the quantity supplied
• There is a limited
amount of land
available
• IPhone
–No matter the
price, it takes time
and skill to make a
IPhone
What is zero elasticity of supply?
• Zero Elasticity of Supply
• A change in price has no
increase in supply
• Usually found in rare, “one of a
kind” products
• Example
– Mona Lisa by Leonardo da Vinci
– No matter how much someone is
willing to pay, there will only ever
be 1 Mona Lisa