This document discusses supply, including the law of supply, supply schedules and curves, determinants of supply, and supply elasticity. The key points are: 1) The law of supply states that the quantity supplied varies directly with price - producers will supply more of a product as the price increases. 2) Supply curves show the different quantities producers will supply at different price points. They are generally upward sloping. 3) Determinants that can shift the supply curve include factor costs, technology, regulations, expectations, and the number of firms in the industry. Anything that impacts production costs or ability will shift the supply curve.

1. Supply
Academic Decathlon—
Lesson 7
Berryhill Economics

2. Supply
 Demand is usually a much easier concept for
students because it deals with the
consumption side of the economy—and
students are familiar with being consumers.
 Now you have to change roles to understand
supply. Think as a business owner. What
would you want to do if you owned a
business and you were on the production
side of the economy?

3. Supply
 The Law of Supply—The quantity of a
product supplied varies directly with price,
ceteris paribus.
--This means the producer will increase their
supply as price goes up, other factors held
constant.

4. Supply
 Individual Supply Schedule—A chart or table
that lists the quantity that one supplier will
produce at each given price
 Market Supply Schedule– A chart or table
that lists the quantity that all producers within
an industry or market will produce at each
given price

5. Supply
 Supply curve—Graph that represents the
different quantities that will be supplied at
each given price (there are individual and
market supply curves, just as there are
individual or market supply schedules)

6. Supply
Supply is
Upward sloping
Because there are
More people willing
To supply as
Price goes up and
Because it requires
More money to
Increase production.

7. Change in Quantity Supplied
 This is a movement ALONG the curve
resulting from a change in price
 As prices change, producers will be willing to
produce more or less (depending on the
direction of the price change) resulting in a
new point on the same graph

8. Change in Qs

9. Change in Supply
 Change in supply is when there is a shift in
the entire supply curve resulting from some
outside force that changes the amount of a
product supplied at each given point

10. Change in Supply
 Cost—how much the supplier must pay to
make the item
 Price—how much the supplier will earn when
they sell the item

11. Change in Supply
 Say you are a producer. What would cause
you to produce MORE or LESS of a product,
even though the price (how much you will
earn when you sell the product) doesn’t
change at all?

12. Change in Supply
 Determinants of Supply—Forces that will
cause the entire supply curve to shift either
left or right (so producers will produce more
or less, even though the price of the product
has not changed)

13. Determinants of Supply
 Factor costs—if the cost of production
increases, the selling price will have to rise to
cover these costs
--so anything that will affect the cost of ANY
of the factors of production (land, labor,
capital) will shift the curve

14. Determinants of Supply
 Technology and regulations—new production
technology can lower the cost of production;
regulations and requirements implemented
by the government will raise the cost of
production

15. Determinants of Supply
 Expectations—future expectations of the
market or industry may cause a firm to adjust
its quantity supplied
 The number of firms—when more firms enter
the industry, more of the good can be offered
at each price

16. Determinants of Supply
 The bottom line—
ANYTHING that changes how long it takes to
produce or how much it costs to produce will
change supply and shift the supply curve

17. Movement of the Supply Curve
 If it costs more to make an item, will you
make more or less?
 LESS, so the curve shifts LEFT (just like the
demand curve)
 If is costs less to make an item, will you
make more or less?
 MORE, so the curve shifts RIGHT (just like
the demand curve)

18. Movements of the Supply Curve

19. Supply Elasticity
 Supply curves, like demand curves, have
different slops.
 They can be more vertical or more
horizontal, and this is due to differences in
supply elasticity.
 However, the determinants of a product’s
supply elasticity is different than the
determinants for demand elasticity.

20. Supply Elasticity
 Supply elasticity is a measure of the way in which
quantity supplied responds to a change in price.
 Elastic supply—a small change in price results in a
relatively larger change in quantity supplied
 Inelastic supply—a small change in price results in a
proportionally smaller change in quantity supplied
 Unit Elastic—a change in price results in a
proportionally equal change in Qs

21. Elastic Supply
 Occurs when price changes are met with
proportionally larger changes in Qs
 The price changes, and the producer
responds by increasing production.
 The producer has the capability and capacity
to increase production, there are no (or few)
limits on how much they can produce.

22. Elastic Supply
 More horizontal
 Price changes, and Qs responds even more

23. Inelastic Supply
 Occurs when changes in price is met with a
proportionally smaller change in Qs
 Even if the producer wanted to increase or
decrease Qs, they can’t.
 There must be some sort of technical or
natural constraint that will not allow
producers increase production.

24. Inelastic Supply
 More vertical
 Producers do not have much control over Qs,
even if prices change

25. Determinants of Supply Elasticity
 The nature of its production is the only
determinant to supply elasticity.
 If a firm can adjust to new prices quickly,
then supply is likely to be elastic.
 If the nature of production is such that
adjustments take longer, then supply is likely
to be inelastic.