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
 Do not forget, this is a behavior; not
a number.
 Supply is showing what would
happen at various prices;
The Law of Supply
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
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
to page 95, read
about Individual and
Market Supply Curves
and explain the
difference between the
Quantity Supplied vs. Supply
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
 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=
Costs of Production
 How
many workers to hire?
- read the example on page 97…and…create
your own scenario with a partner…*notebook
 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
Marginal Returns –
workers get in each other’s
way – disruption of production –
overall output decreases
Production Costs
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
Total Cost = fixed + variable
 Marginal
Cost – the additional cost of
producing one more unit – chart on
pg. 101
Setting Output
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*