The Law of Supply
Economics Chapter 5
Demand and Supply
What is Supply?
• Supply: What producers are willing to
sell at various prices
Supply Schedule and Curve
• Supply Schedule: table that shows quantities
supplied at different market prices
• Supply Curve: shows relationship between
price and quantity that producers are willing
and able to supply
• Market Supply: sum of all individual quantities
supplied
Supply Schedule and Curve
Quantity
$0.99
$0.89
$0.79
$0.69
$0.59
$0.49
$0.39
$0.29
$0.10
$0.09
18
16
14
12
10
8
6
4
2
0
Price
Price
As Price goes up, Quantity
Supplied goes up
Quantity Supplied
How Much to Produce?
• The Law of Supply states:
As price increases, quantity supplied
increases
Change in Quantity Supplied
Price causes
movement
along the curve
The movement along the curve reflects a change
in quantity supplied. The only factor that causes
a change in quantity supplied is price.
Supply Shifters
Anything that is
viewed as increasing
or decreasing the
cost(s) to supply the
good or service will
change supply. This
will shift the curve to
the left or to the
right.
What Causes Change in Supply?
Changes in supply can be caused by a number of factors:
1. Costs of Inputs – land, labor, raw materials, etc. (factors of
production)
2. Changes in conditions – Natural disasters/International
events
3. Technology – improving productivity
4. Producer Expectations – will prices rise or fall?
5. Number of Sellers – more sellers offering or producing the
product
6. Government policy – regulations and subsidies (cash
payment aimed at helping a producer to operate)
Supply Headlines Activity
• How will the Headlines impact Supply?
• Work alone or with a partner
• Be prepared to share your answers
• Video Clip:
• Indiana Jones: Demand, Supply, Equilibrium,
Shifts (7 min)
• http://www.youtube.com/watch?v=RP0j3Lnlazs
• Supply Exit Ticket