Supply
Mr. Southward
What is Supply?
 The
amount of a product that would
be offered for sale at all possible
prices that could prevail in the
market;
 Do not forget, this is a behavior; not
a number.
 Supply is showing what would
happen at various prices;
The Law of Supply
Because
producers are out
to make the greatest profit
possible, it makes sense for
them to see higher prices as
a good thing.
Two different ways to view
Supply
 Supply
Schedule  a listing of the various
quantities of a particular product supplied
at all possible prices in the market
 Supply
Curve  the graphical representation of
the supply schedule;
The Market Supply Curve
Refer
to page 95, read
about Individual and
Market Supply Curves
and explain the
difference between the
two.
Quantity Supplied vs. Supply
Think
back to what we talked
about with demand, grab a
partner and read about the
difference between a change
in quantity supplied and a
change in supply.
Factors Causing a change in
Supply (pages 104-108)
 Cost
of Inputs
 Technology
 Subsidies and supply
 Excise Taxes
 Role of Government Rules and
Regulations
 Changes in the Global Economy
 Expectations
 Changes in Number of Competitors
Elasticity of Supply
measures how firms will
respond to changes in the
price of a good or service
 >1= supply is very sensitive to
changes in price and is elastic
<1 = inelastic
Equal % change in price = to 1=
unitary

Costs of Production
 How
many workers to hire?
- read the example on page 97…and…create
your own scenario with a partner…*notebook
grade*
 Marginal Product of Labor – change in output
from hiring one more worker (pg. 98)
 Increasing Marginal Returns – specialization –
increases output
 Diminishing Marginal Returns – specialization
ends – adding more workers increases total
output…but…at a decreasing rate (pg. 98) –
limited capital
Negative
Marginal Returns –
workers get in each other’s
way – disruption of production –
overall output decreases
Production Costs
Fixed
Costs – does not change –
rent…property taxes…salaries
Variable Costs – rise or fall
depending on the Q produced –
reduce weekly hours for
workers…cost of labor = number of
workers…electricity/heating
Total Cost = fixed + variable
 Marginal
Cost – the additional cost of
producing one more unit – chart on
pg. 101
Setting Output
Marginal
Revenue and
Marginal Cost
Responding to Price Changes
The Shutdown Decision
*Explain concept and terms in
your n/b…yes…it is a n/b grade*