2. T H E D E F I N I T I O N
O F S U P P LY
• Being willing and able
to sell a good or
service at a given price,
time and place.
3. T H E S E L L E R ’ S
T R A D E - O F F
• Think of this in terms of a trade-off
for potential sellers:
• Should I do the extra work required
to produce something and attempt
to sell it?
• Or do I choose not to produce or
sell it because the benefit (price I
would likely sell it for) isn’t worth it?
• Supply = Inventory
4. T H E L AW O F
S U P P LY
• Known as The Price Effect
• As the price rises the quantity
supplied rises.
• As the price decreases the quantity
supplied decreases
• This describes the upward slope of
the Supply curve and shows the
trade-off a seller makes.
5. M A R G I N A L
C O S T
• Another way of looking at the
Supply curve is to think of it as a
Marginal Cost curve:
• Firms will continue to produce and
supply as long as the cost to
produce each new unit is less than
the price they will receive.
6. FA C T O R S T H AT
S H I F T S U P P LY
• Cost of Inputs (Factors of
Prod.)
• Future Expectations
• Population of Sellers
• Government Influence/
Intervention
• Productivity of Labor
• Technology
7. FA C T O R S T H AT
S H I F T S U P P LY
• To increase production, typically
sellers require more resources
• Specifically, adding labor boosts a
seller’s productivity
• However - as additional labor is
added, each individual unit of labor
becomes less efficient.
• Think companies that have 50k
employees
• Layoffs and downsizing is often
done to increase efficiency
