This document summarizes key concepts about supply in economics. It defines supply as the quantity of a good or service one is willing and able to provide at various prices. It describes the law of supply, which states that firms will supply more of a good at a higher price and less at a lower price. It explains how to graph a market supply curve and major factors that can cause supply to shift, such as changes in marginal costs, the number of sellers, or producer expectations.

1. Chapter 4: Supply

2. Supply Economically Speaking: Qty of a good or service one is willing and able to provide at various prices If you are unwilling and/or unable to sell, you can’t supply Law of Supply: Firms will sell more at a higher cost, and less at a lower cost Price Effect: How Law of Demand affects sellers - they’ll sell more at a higher price than at a lower price (Prices = incentives, disincentives)

3. How to Graph Supply: Market Supply: All possible P,Q combinations! Aggregate Supply : Total of all goods,services of all firms Supply (S) Quantity (Q) Price (P)

4. Major Consideration of Supply Marginal Costs: Cost of producing add’l goods and services  production =  cost of production  labor costs  wear on machinery  difficulty in extracting resources (scarcity) Production will continue until marginal costs = marginal benefits

5. Price Elasticity of Supply Elastic (Luxury item): Price changes greatly affect the # of products supplied  # of items to sell when price  Inelastic (Necessity): Price changes have little or no effect on # of products supplied Gas is inelastic, since a price  means producers can make  $ w/ same sales (my gas tank didn’t get any smaller) :(

6. Price Effect vs Change in Supply Market Supply is the combination of all P and Q supplied Various points along supply curve = Price Effect A Change in Supply occurs when: Firms supply  Q at all P Firms supply  Q at all P

7. A Supply Curve Shift S 1 = Original Supply S 2 = Increase in Supply S 3 = Decrease in Supply P Q S 1 S 2 S 3

8. What Causes A Supply Shift? Change in Marginal Cost Change in the # of Sellers Change in Expectations

9. Shifting Supply Curves 1) When Marginal cost  in supply if # of producers  supply price of cheese  supply now and in future