1. SUPPLYSUPPLY
DemandDemand’’s Partners Partner

2. SupplySupply
 Is the quantity of a good or service thatIs the quantity of a good or service that
sellers aresellers are ableable andand willingwilling to sell at ato sell at a
specific price in a particular period of timespecific price in a particular period of time

3. AbbreviationsAbbreviations
PP = price= price
QsQs = quantity supplied= quantity supplied

4. Law of SupplyLaw of Supply
When P , QsWhen P , Qs
When P , QsWhen P , Qs

5. How sellers think!How sellers think!
 Buyers and sellers look at high and low pricesBuyers and sellers look at high and low prices
differentlydifferently
 Buyers are discouraged by high pricesBuyers are discouraged by high prices  they buythey buy
less and look for substitute productsless and look for substitute products
 Sellers are encouraged by high pricesSellers are encouraged by high prices  they want tothey want to
produce and sell moreproduce and sell more

6. S
Q
P
P1
P0
Qs0 Qs1
Change in Price
P
P0
P1
Q
S
Qs0Qs1
P , Qs P , Qs
Movement along the curve caused by P

7. A Change in PriceA Change in Price
 Causes movement along the supply curveCauses movement along the supply curve
and anand an ∆∆ in quantity supplied.in quantity supplied.
 AnAn ∆∆ in quantity supplied means that onlyin quantity supplied means that only
thethe priceprice has changed and a new quantityhas changed and a new quantity
is supplied along a constant supply curve.is supplied along a constant supply curve.

8. Change in Supply –
Not caused by change in Price
1. Change in environmental conditions
2. Change in technology
3. Change in resource prices
4. Change in the number of suppliers
Results in a shift of the supply curve

9. Change in Weather –
Market for Oranges
P P
P
P
Q1 Q0 Q1Q0
Q Q
S1
S0
S1
S0
Bad weather – less is
supplied to the market
= S
Good weather – more is
supplied to the market
= S

10. Change in Resource Prices –
Market for Pork Production
P
P
Q1 Q0
Q
S1
S0
Due to increase in resource prices
less is supplied to the market
= S
Increased costs due to
Increased:
•Wages
•Pig feed costs
•Manufacturing costs
Note: feed costs for
pig farmers = an in
resource prices.
Therefore S

11. Change in Resource Prices –
Market for Air Canada Flights
P
P
Q0 Q1
Q
S0
S1
Due to decrease in resource prices
– more is supplied to the market
= S
If workers agree to a
in wages = a in
Production costs,
Therefore, S
“Key words” to
recognize a in Supply
= manufacturing, costs,
inputs, wages, labour
costs, production,
producers

12. Change in Technology –
Market for Cars
P
P
Q0 Q1
Q
S0
S1
If a new technology makes
production easier, saves
time, more efficient, less
labour, etc. = S
Due to decrease in production costs
– more is supplied to the market
= S

13. Change in the number of Suppliers
P
P
Q0 Q1
Q
S0
S1
The creation of “The
National Post” = a new
supplier = S
P
P
Q1 Q0
Q
S1
S0
The acquisition of Chapters
by Indigo will result in the
closing of some Chapters
stores = S
Market for
Newspapers
Market for
Bookstores

14. Change in S not causedChange in S not caused
by a change in Priceby a change in Price
 S = S curve shifts out, to the rightS = S curve shifts out, to the right
 S = S curve shifts in, to the leftS = S curve shifts in, to the left

15. AA ∆∆ in Supplyin Supply
 AA ∆∆ (increase or decrease) in supply or a(increase or decrease) in supply or a
shift in supply means that a change inshift in supply means that a change in
amount supplied occurs because a shift inamount supplied occurs because a shift in
the position of the supply curve.the position of the supply curve.