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Need new tires $400
Need work done on car’s transmission $1,000
Speeding ticket less than 15 mph over limit $200
Speeding ticket more than 15 mph over limit $350
Ticket for running a red light $200
Car accident $500
Car accident $500
Car accident $500
Root canal needed $300
You need glasses $100
You find $10
You broke your leg $1,000
You have a sinus infection $150
You have pneumonia $350
Your irresponsible brother is broke and needs $400 to pay his bills
Need new brakes $200
You need knee surgery $2,000
You are a bridesmaid in a wedding $600 ($250 airfare, $100 hotel, $200
dress, $50 wedding gift)
Need new tires $400
Speeding ticket less than 15 mph over limit $200
Speeding ticket less than 15 mph over limit $200
Speeding ticket less than 15 mph over limit $200
DEFINITION:
The willingness and ability of producers to offer
goods and services for sale.



Law of Supply:
Suppliers will normally offer more for sale at high
prices and less for sale at lower prices.
As price decreases, quantity supplied decreases:
P Qs

As prices increase, quantity supplied increases:
PQs

Price and quantity supplied have a direct
relationship

Why will suppliers normally offer more for
sale at high prices and less for sale at lower
prices?
Correct Answer:
They can increase their profits if they supply
more when the price is higher

Shows how much of a
good or service an
individual producer is
willing and able to
offer for sale at each
price in a market.
The Smiths’ Tomato
Supply Schedule
Price per Pound
($)
Quantity
Supplied (in
pounds)
2.00
50
1.75
40
1.50
34
1.25
30
1.00
24
.75
20
.50
10

Shows how much
of a good or
service an
individual is
willing and able
to offer for sale
at each price

Shows how
much of a good
or service all
producers in a
market are
willing and able
to offer for sale
at each price.
Price per Pound
($)
Quantity
Supplied (in
pounds)
2.00
350
1.75
300
1.50
250
1.25
200
1.00
150
.75
100
.50
50

Shows the data
from the market
supply schedule


An ________ supply schedule and graph shows
how much Ms. Smith would be willing to sell
her tomatoes at each and every price
A _________ supply schedule and graph shows
how much all tomato producers would be
willing to sell their tomatoes at each and
every price

Janine owns a small factory that
produces custom blue jeans
 Three sewing machines
 Three workers- 12 pairs/day

How will hiring one more worker affect
production?
◦ Change in total product that results from hiring one
more worker is called the marginal product
# of workers
Pairs of Jeans
made
New Employee’s
Marginal Product
3 worker
12 pairs/day
4 workers
19 pairs/day
7 pairs of jeans
5 workers
29 pairs/day
10 pairs of jeans

How did marginal product
increase?
◦ Work on sewing machines
PLUS cut cloth, package
jeans, clean shop
◦ Fourth employee helped
with other tasks and first
three employees could
spend more time sewing
◦ Fifth employee allowed
labor to be divided even
more efficiently
◦ Each worker focused on a
particular facet of
production (specialization)
# of
Workers
Total
Product
Marginal
Product
0
0
0
1
3
3
2
7
4
3
12
5
4
19
7
5
29
10
6
42
13
7
53
11
8
61
8
9
66
5
10
67
1
11
65
-2
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With up to six employees,
Janine’s operation experiences
increasing returns (each new
worker adds more to total
input than the last)
With between seven and ten
employees, Janine’s operation
experiences diminishing
returns (each new worker
causes total output to grow
but at a decreasing rate.
With eleven employees, total
output actually decreases
(employees become crowded
and operations become
disorganized)

Fixed costs- expenses that the owners must
pay for whether they produce nothing, a little,
or a lot
◦ Examples: Janine’s mortgage on her factory,
insurance, and utility bills

Variable costs- business costs that vary as
the level of production output changes.
◦ Examples: wages, fabric, thread, zippers, buttons,
shipping costs
 Total
cost- add fixed and variable
costs together
 Marginal
cost- the additional cost
of producing one more unit of a
product
Linda owns a candle shop. Linda can make 10 candles a day with 2
workers. When she hires a 3rd worker, she can make 16 candles a day.
Regardless of how many candles she makes, Linda always spends a
monthly amount of $1000 on rent for her shop, $200 on insurance, and
$100 on utilities. She also spends an average of $5 on wax, scents, and
wage costs per candle.
1. What is the marginal product of hiring a 3rd worker?
6 Candles
2. What are her monthly fixed costs?
$1300 ($1000 rent+$200 insurance+$100 utilities)
3. What are her variable costs if she makes 300 candles a
month?
$1500 ($5 for wax, scents, and wage x 300 candles)
4. What are her monthly total costs?
$2700
( $1300 fixed costs+ $1500 variable costs)
5. What is the marginal cost of producing a 301st candle?
$5, additional cost of one extra candle
A change in quantity
Price
supplied doesn’t shift the
supply curve. The change
refers to movement along
the curve itself.
Supply of Bracelets
Occurs because of a change
in…
PRICE!!!!!!
• As you move to the right
along the curve, the quantity
supplied increases.
• As you move to the left
along the curve, the quantity
supplied decreases.
Quantity Supplied
1.
When the price is
$0.75 you supply 20
bracelets. What is the Price
new quantity supplied
when the price is
$1.75?
40 bracelets
Supply of Bracelets
2. What caused this
change in quantity
supplied?
Price
Quantity Supplied

Change in supply occurs when something
prompts producers to offer different amounts of
sale at every price.
◦
◦
When production costs increase, supply decreases
When production costs decrease, supply increases.

1. Input costs- the price of the resources needed
to produce a good or service
 example: nutrition bars that contain peanuts, price of peanuts
increases, cost to make nutrition bars increases

2. Labor productivity- the amount of G/S a person
can produce in a given time
 example: better-trained and more-skilled workers can produce
more goods in less time

3. Technology- the application of scientific
methods and discoveries to the production
process, resulting in new products or
manufacturing techniques.
 example: personal computer enables workers to be more
productive

4. Government action- taxes, subsides, or regulations
can affect production
 example: excise tax- on alcohol and tobacco, things whose
consumption the government is interested in discouraging

5. Producer expectations- expectations of price
changes can affect the quantity producers are willing to
supply
 example: a gas station expects the price of gas to be higher in the
future, he or she may save some gas to sell later, thereby
decreasing supply

6. Number of producers- More producers= reduction
in supply. Less producers= increase in supply
 Example: Mike’s doughnut shop is the only doughnut shop in
town. He supplies 1,000 doughnuts a day. If 2 other doughnut
shops open, the increased competition might cause Mike to only
supply 500 doughnuts a day.
1. A TV factory fires a bunch of
4. Ms. Frey has a business selling
workers because they are
cookies. She does so well,
having financial problems
Bilbrey, Gilchrist and Westerfeld
start their own cookie making

Labor Productivity (Supply
business.
Decrease)

Number of Producers
(Supply Decrease)
2. It is the week before Valentine’s
Day. Candy producers anticipate
5. In order to discourage the sale
that they will receive a higher
of fireworks, the government
price for their goods, which leads
creates an excise tax on the
them to change the amount of
product
candy they supply that week

Government Action (Supply
 Producer Expectations
Decrease)
(Supply Increase)
3. The price of rubber increases,
which affects the production at
a local bike shop

Input costs (Supply
Decrease)
6. A marketing firm gets the latest
and best computers for their
employees
 Technology (Supply Increase)
Which curve demonstrates the change in supply if you
produce t-shirts and your company got new, more
efficient sewing machines?
A.
B.
c.
D.
Which curve demonstrates what would happen to supply if
you produced t-shirts and Target decided to put your shirts
on sale? (Target decreases the price of your product)
A.
B.
c.
D.
Which curve demonstrates the change in supply if you
produce t-shirts and the price of cotton increased?
A.
B.
c.
D.
Demand
Supply
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Do on your own