Chapter 5 Supply

Supply

defined as the amount of a product that would be offered for sale at all possible prices that could prevail in the market. It is what will be produced and is from the perspective of the producer

Supply Curve

graph showing the various quantities supplied at all possible prices that might prevail in the market at any given time.All normal supply curves have a positive slope that goes up from the lower left-hand corner of the graph to the upper right-hand corner. This shows that if the price goes up, the quantity supplied will go up too.

A shift to the right means

increase

unit elastic

proportional change in quantity supplied due to a change in price

inelastic

small change in quantity supplied due to a change in price

Change in Supply

a situation where suppliers offer different amounts of products for sale at all possible prices in the market. quantity changes even though the price remains the same

Change in Quantity Supplied

the change in amount offered for sale in response to a change in price

Subsidy

is a government payment to an individual, business, or other group to encourage or protect a certain type of economic activity

Supply Schedule

is a listing of the various quantities of a particular product supplied at all possible prices in the mar- ket

Supply elasticity

is a measure of the way in which the quantity supplied responds to a change in price

Quantity Supplied

is the amount that producers bring to market at any given price. The amount of a good or service offered for sale at a specific price. Represented by a point on the supply curve. The higher the price; the larger the quantity produced

elastic

large change in quantity supplied due to a change in price

Taxes

penalties sometimes to discourage your purchase

A shift to the left means

decrease

Factors that cause a change in supply (shift in the curve)

1. Cost of Resources 2. Productivity -More output is produced using the same amount of input 3. Number of Producers/Sellers -More producers shift right less producers shift left 4. Technology 5. Taxes and Substitutes 6. Expectations 7. Government Regulations

Section Overview

Supply, like demand, is another important microeconomic concept. Together, supply and demand explain how prices are determined and how markets function. Section 1 defines supply as the quantities of output that producers will bring to market at each and every price. Like demand, supply can be presented in the form of a supply schedule, or graphically as a supply curve. Individual producers have their own supply curves, and the market supply curve is the sum of individual supply curves. The Law of Supply states that more output will be offered for sale at higher prices and less at lower prices. A change in quantity supplied is represented by a movement along the supply curve, whereas a change in supply is represented by a shift of the supply curve to the left or right. Changes in supply are caused by changes in the cost of inputs, productivity, technology, taxes, subsidies, expectations, government regulations, and the number of sellers in the market. Supply elasticity describes how producers will change the quantity they supply in response to a change in price.

Law of Supply

the principle that suppliers will normally offer more for sale at high prices and less at lower prices

Market Supply Curve

the supply curve that shows the quantities offered at various prices by all firms that offer the product for sale in a given market