Supply

Demands Other Half!

What is Supply?
Viewpoint of the supplier (manufacturer)
The amount of a product that would be
offered for sale at all possible prices within
a market.
Law of Supply
Suppliers will produce more at higher
prices than lower prices.
May even stop producing a product at a
lower price to boost Demand
All about: $$$$$
The Supply Schedule
Just like a Demand Schedule
A listing of the various quantities of a
particular product at all the possible prices
offered within the market.
Individual/Market Supply Curve
Slopes from the lower left-
hand corner to the upper-
right corner.
Upward sloping
Positive Correlation
If the supply price increases,
so does quantity.
If the supply price decreases,
so does quantity

Change in Quantity Supplied
The change in amount offered for sale in
response to a change in price.
Determinants of Supply
1. Cost of Inputs
2. Productivity
3. Technology
4. Taxes and Subsidies
5. Expectations
6. Government Regulations
7. Number of Sellers
Cost of Inputs
How much a product
costs to make

1. Supply will increase
when cost decreases

2. Supply will decrease
when cost increases
Productivity
Happy worker= an
efficient worker
1. Production will
increase with a
motivated worker

2. Likewise, production
will decrease with
an unmotivated
worker
Technology
Usually will
increase supply
New
technologies
offer more
efficient ways to
produce goods
Ex. 3-D Printer!
Taxes
Suppliers view taxes as
a cost on their product.
1. Increase in taxes,
decrease in supply
output

2. Decrease in taxes,
increase in supply
output
Subsidies
Subsidies, which are
government payments to
encourage businesses to
produce certain goods,
affect supply.
1. Increase in subsidies,
increase in supply output

2. Decrease in subsidies,
decrease in supply output

Expectations
If suppliers believe the price of
their product will increase, they
may purposefully limit the supply!

1. This may drive the price up further.

2. Or if the price of a product may
decrease, suppliers will try to
produce as much as possible at
the current market high.
Ex. Tickle-Me-Elmo
Government Regulations
Suppliers view regulations
as a cost on their product.

1. If regulations increase,
supply will decrease ( more
cost)

2. If regulations decrease,
supply will increase (less
cost)
Number of Sellers
1. The larger number of
sellers, the increase in
supply of a given
product.

2. The smaller number of
sellers, the decrease
in supply of a given
product.
Ex.: EBAY
Elasticity of Supply
Exactly the same as demand!
1. Elastic
Change in price causes a relatively large
change in quantity supplied.
2. Inelastic
Change in price causes a relatively small
change in quantity supplied.
3. Unit Elastic
Change in price causes a proportional
change in quantity supplied.
Determinants of Supply Elasticity
Only determinant:
Production

1. If a firm can react
quickly to higher
or lower prices:
Elastic

2. If a firm cant
react to a change
in price: inelastic