Module 6: Supply and Demand: Supply

5 factors that shift the supply curve of a good or service

1. changes in input prices 2. changes in prices of related goods/services 3. changes in technology 4. changes in expectations 5. changes in number of producers

changes in expectations

when suppliers have choices about when they put their good for sale, changes in expected future price of the good can lead a supplied to supply less/more of the good today. it is a comparison of current vs. future prices leftward shift: increase in the anticipated future price of a G/S reduces supply today (producers store more for later, lessening amount available today) rightward shift: fall in the anticipated future price increases supply today - producers will supply more at every given price because soon, all these prices will drop.

changes in the prices of related goods or services (substitutes in production)

when the price of one good rises, the producer will supply less of the other good at any given price (Qs), shifting curve for the second good to the left. - the same materials are used to produce both goods, so if the price of one of those goods is rising, the producer will want to increase Qs for that good, thus using more of that input material. results in less input for the other good, but its ok because the price of this good isnt as high as the other (the one with more supply now and thus more profit gained from it)

changes in the price of related goods or services (complements in production)

when two goods produced by the same producer are produced "with" eachother, they are complements. -> the increase in production of one good leads to an increase in production of the other as well (from the same given resource). production of one good triggers the production of another, often as a byproduct (goods are simultaneously produced from the same resource) "produce one, produce both" increase in price of one complement good causes increase in supply of the other. decrease in supply of one complement good causes a decrease in supply of the other

supply schedule

shows how much of a good or service producers would supply at different prices. the higher the price, the more the producers are willing to sell

supply curve

shows relationship between the quantity suppled and the price. each point on the curve represents an entry from the supply schedule upward sloping

when the price is expected to fall in the future

supply of the good increases today

quantity supplied vs supply

Quantity Supplied refers to a particular amount offered for sale at a particular price, as shown by a point on a given supply curve. Supply is the entire relation between the price and quantity supplied, as shown by the supply schedule or supply curve. quantity supplied is a movement along the supply curve caused by a change in price, supply is a curve shift left/right

when the price of a complement in production rises

supply of the original good increases

when the price of a substitute in production falls

supply of the original good increases

law of supply

all other factors being equal, the price and quantity supplied of a good are positively related, meaning as price increases, quantity supplied increases

changes in technology (improvements in technology)

enables producers spend less on inputs yet produce same output better technology -> lower cost of production (inputs) -> supply increase (cuz less money to produce so more can be produced) -> rightward shift of curve

changes in the number of producers (market supply curve)

how the combined total quantity supplied by all producers in the market depends on the market price of that good

changes in the number of producers (individual supply curve)

illustrates the relationship between quantity supplied and price for an individual producer

when the number of producers rises

market supply of the good increases

changes in technology (technology)

refers to all the methods people can use to turn inputs into useful goods/services

changes in input prices/input

refers to any good or service that is used to produce another good or service (output) inputs have prices. - increase in the price of an input makes production of the final good more costly for the seller -> thus, producers are less willing to supply the final good at any given price, shifting the supply curve to the left - fall in the price of an input makes the production of the final good less costly for sellers, they are thus more willing to supply the good at any given price, shifting the supply curve rightward

movements along the supply curve

result of a rise in the price of a good. it is a change in the quantity supplied of a good arising from a change in the goods price (as price goes up Qs goes up as producers want more profit)

shifts of the supply curve

result of an increase in the quantity supplied at any given price

change in supply

shift of the supply curve, which changes the quantity supplied at any given price

When the price is expected to rise in the future

supply of the good decreases today

when the price of an input falls

supply of the good increases

when the technology used to produce the good improves

supply of the good increases

quantity supplied

the actual amount of a good or service people are willing to sell at some specific price. quantity producers are willing to produce and sell depends on the price offered

horizontal sum

the market supply curve is the ____________ of the individual supply curves of all producers in that market