Module 6
Feb 2015
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Quantity supplied – the actual amount of a
good or service producers are willing to sell
at a specific price
Supply schedule shows how much of a good
or service producers will supply at different
prices
Supply curve – shows the relationship
between quantity supplied and price
Higher price generally leads to higher
quantity supplied. Supply has an upward
sloping curve
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Law of supply – other things being equal, the
price and quantity supplied of a good are
positively related.
Change in supply – a shift of the supply curve
which changes the quantity supplied at any
given price (ex: more producers)
Movement along the supply curve – a change
in the quantity supplied of a good that is the
result of a change in that good’s price.
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Candy at .30 – 25, .50 – 100 pieces, at .75 –
200 pieces, at 1.00 – 300 pieces
Price of Candy per piece
Quantity of candy
supplied - pieces
1.00
300
.75
200
.50
100
.30
25
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An increase in supply means a rightward shift
of the supply curve
A decrease in supply means a leftward shift of
the supply curve
Changes in input prices
Changes in the prices of related goods or
services
Changes in technology
Changes in expectations
Changes in the number of producers
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Input prices – inputs are anything used to
produce a good or service, if the price of an
input changes, the price to produce the good
or service changes, also.
Prices of Related Goods or Services – Say a
farmer raises chickens and goats…if the
consumers demand more chickens than
goats, then the farmer may choose to raise
more chickens, this is a substitute in
production.
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Since the farmer is raising chickens, a byproduct of that is either eggs or fertilizer or
both. Because the farmer now has more than
one product and each is supplied at any given
price, these by-products are complements in
production.
Technology – this doesn’t have to be superduper technology, it could be a better ice
cream scoop for a Baskin-Robbins…anything
that allows for faster or greater production
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Expectations – when suppliers have some
choice about when they put their goods up
for sale
◦ Ex: Water skis and snow skis – a company makes
both but focuses supply seasonally
◦ Ex: A company may choose to supply a limited
amount of goods during September and October,
but then release a stockpile during November and
December.
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Individual supply curve illustrates the
relationship between the quantity supplied
and price for an individual producer
Market supply curve illustrates the total
quantity supplied from all the individual
producers
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Equilibrium – an economic situation is when
no individual would be better off doing
something different
Competitive Market is in equilibrium when
price has moved to a level at which the qty
demanded of a good equals the qty supplied
The price at which this takes place is
Equilibrium Price (Market-Clearing Price)
The qty of the good bought and sold at that
price is Equilibrium Quantity
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Equilibrium price – occurs in an established
market where lowering the price doesn’t
make sense when the seller can get the same
price as every other seller.
Surplus – when the qty supplied exceeds the
qty demanded. This occurs when the price is
ABOVE its equilibrium level.
Shortage – when the qty demanded exceeds
the qty supplied. This occurs when the price
is BELOW its equilibrium level.
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Module 6 Review Questions
Bade and Parkin – page 108, questions 1-6