SUPPLY- refers to the quantity of goods that a seller is willing to offer for sale. THE LAW OF SUPPLY- as the price increases, the quantity supplied of that product also increases. NON-PRICE DETERMINANTS OF SUPPLY: *The cost of production- refers to the expenses incurred to produce the good. *Technology- the use of improved technology in the production of a good will result in the increased supply of that good. *availability of raw materials and resources Alfred Marshall- a British economist who defined the Law of Demand and Supply EQUILIBRIUM- is a state of balance when demand is equal to supply. MARKET EQUILIBRIUM- is attained when the quantity demanded is equal to the quantity supply. DEGREES OF ELASTICITY: 1. ELASTIC- a change in a determinant will lead to a proportionately greater change in demand or supply. The absolute value of the coefficient of elasticity is greater than 1. If the price of LPG increases by 10% and as a result the quantity demanded goes down by 12% then we say that the demand for LPG is elastic. 2. INELASTIC- a change in a determinant will lead to a proportionately lesser change in demand or supply. The absolute value of the coefficient of elasticity is less than 1. Suppose the price of cellphone load goes up by 5% and the quantity demanded goes down by 3%, then we can say that demand for cellphone load is inelastic. 3. UNITARY ELASTIC- a change in a determinant will lead to a proportionately equal change in demand or supply. The absolute value of the coefficient of elasticity is equal to 1. Let say that the price of string beans goes down by 6% and as a result the quantity demanded goes up by 6% also, we describe the demand for string beans as unitary elastic. 2 WAYS THAT THE VALUE PRICE OF ELASTICITY IS MEASURED: 1. ARC ELASTICITY- the value of elasticity is computed by choosing two points on the demand curve and comparing the percentage changes in the quantity and the price on those two points. 2. POINT ELASTICITY-measure the degree of elasticity on a single point on the demand curve. Changes on a single point are infinitesimally small.