man68624_ch04.qxd
72
1/22/03
PART 2
9:52 AM
Page 72
SUPPLY AND DEMAND I: HOW MARKETS WORK
FIGURE 5
Ben’s Supply Schedule and Supply Curve
The supply schedule shows the quantity supplied at each price. This supply curve, which graphs the supply schedule, shows how the quantity
supplied of the good changes as its price varies. Because a higher price increases the quantity supplied, the supply curve slopes upward.
Price of
Ice-Cream Cone
Quantity of
Cones Supplied
$0.00
0.50
1.00
1.50
2.00
2.50
3.00
0
0
1
2
3
4
5
Price of
Ice-Cream
Cone
$3.00
2.50
1. An
increase
in price ... 2.00
1.50
1.00
0.50
0
supply schedule
a table that shows the relationship
between the price of a good and the
quantity supplied
supply curve
a graph of the relationship between
the price of a good and the quantity
supplied
1 2
3
4
5
6
7
8
9 10 11 12 Quantity of
Ice-Cream Cones
2. ... increases quantity of cones supplied.
The table in Figure 5 shows the quantity supplied by Ben, an ice-cream seller, at
various prices of ice cream. At a price below $1.00, Ben does not supply any ice
cream at all. As the price rises, he supplies a greater and greater quantity. This is
the supply schedule, a table that shows the relationship between the price of a
good and the quantity supplied, holding constant everything else that influences
how much producers of the good want to sell.
The graph in Figure 5 uses the numbers from the table to illustrate the law of
supply. The curve relating price and quantity supplied is called the supply curve.
The supply curve slopes upward because, other things equal, a higher price means
a greater quantity supplied.
Market Supply versus Individual Supply
Just as market demand is the sum of the demands of all buyers, market supply is
the sum of the supplies of all sellers. The table in Figure 6 shows the supply
schedules for two ice-cream producers—Ben and Jerry. At any price, Ben’s supply schedule tells us the quantity of ice cream Ben supplies, and Jerry’s supply
schedule tells us the quantity of ice cream Jerry supplies. The market supply is the
sum of the two individual supplies.