Supply- the amount made or offered for sale at given prices

Does not follow the logic of survival, suppliers think more like insatiable creatures, there is no such thing as enough

Supply schedule of quantities offered for sale at all possible prices in the market

Supply = seller's behavior; no consumers involved!!!

  Supply Schedule chart showing

quantities for sale at every price (model of seller's behavior)

At a given point in time, The lower the

price, the smaller the quantity supplied;

The higher the price the larger the quantity supplied.

This is a DIRECT relationship.

Price Quantity Supplied

$5 50

$10 100

$15 150

$20 200

$25 250

Plot your graph in your notes!

Price $

Quantity Bought and Sold (000s)

Supply

$10

100

$20

200

Change in Quantity Supplied- when the PRICE of a item changes more or less will be supplied

Move ALONG the curve

Price $

Quantity

Supply

$10

100

$20

200

Many factors effect supply, when they change so does the supply of the product.

1. Cost of inputs- supplies cost more = can’t afford to make more

2. Productivity- how hard are the workers working

3. Technology- is it easier/ cheaper to make a product

4. Taxes and subsidies- $ paid to gov’t = less money to make a product

5. Expectations – How producers feel about the future of a product

6. Government Regulations – New laws can affect cost of productions

7. Number of Sellers – more sellers = more supply, fewer sellers = less supply

Size of marketTechnologyOther govenment regulationResource costExpectationSubsidies

The Supply CurvePrice

Quantity

Supply 1

$10

400

S2

100

S3

900

Size of Market(Number of Producers)

• If more producers enter a market, the supply will increase.

Technology

• An improvement in technology increases supply.

• Examples:

"I will build a motor car for the great multitude."

• After Ford opened his new Model T plant in 1913, he produced one Model T every 93 minutes, a remarkable reduction from the 728 minutes per car that was previously required.

• By the time the last Model T was built in 1927, the company was producing an automobile every 24 seconds.

• In part because of this efficiency, the Model T's price dropped from its original 1908 cost of nearly $1,000 to under $300 in 1927.

Other Government Regulations

• Excise Tax• Regulation

Regulations

• Government intervention in a market through indirect means.– Safety Regulations– Environmental Laws

Excise Tax

• Two major uses: 1. To discourage the use of a good 2. To help maintain competition in

domestic industries

Prices of Resources

• An increase in resource prices decreases supply.

• Examples: What would the effect of a frost be on the orange juice market?

Why do companies outsource?

Producer Expectations

• Changes in producers' expectations about the future can cause a change in the current supply of products.

Subsidy

• Government payment to producers to support the market.