SUPPLY

CHAPTER 21, SECTIONS 1-3

WHAT IS SUPPLY?
Supply the various quantities of a good
or service that producers are willing to sell
at all possible market prices
Supply Schedule a numerical chart that
illustrates the law of supply
Supply Curve a graph that shows the
amount of a product supplied at all
possible prices

WHAT IS SUPPLY?
Law of Supply suppliers will normally
offer more for sale at higher prices and
less at lower prices
Market Supply the total supply
schedules of all businesses that provide
the same good or service

SUPPLY ILLUSTRATED

CHANGES IN SUPPLY
Changes in the cost of resources
Increase productivity the degree to
which resources are being used efficiently
to produce goods and services
Technology the methods or processes
used to make goods and services

CHANGES IN SUPPLY
Changes in government policies
increased minimum wage, new
regulations, etc.
Changes in taxes or subsidies a
government payment to an individual,
business or other group for certain actions

SHIFT IN SUPPLY
Shift (decrease) in the supply of umbrellas

SUPPLY ELASTICITY
Supply elasticity a measure of how the
quantity supplied of a good or service
changes in response to changes in price
Products that are easier to produce are
supply ELASTIC like kites, candy or
Happy Meal toys
Products that are hard to produce are
supply INELASTIC like diamonds

SUPPLY & DEMAND AT WORK

Markets consist of all buyers and sellers of
a product combining the supply and
demand curves creates a way to look at
the market

SUPPLY & DEMAND AT WORK

Surplus quantity supplied is higher than the
quantity demanded
SURPLUS

SUPPLY & DEMAND AT WORK

Shortage quantity demanded is higher than
the quantity supplied
SHORTAGE

SUPPLY & DEMAND AT WORK

The point where supply and demand achieve
balance is the equilibrium price (market price)

SUPPLY & DEMAND AT WORK

PRICE CONTROLS
Price ceiling is a govt-set max price for a
good (rent)
Price floor is a govt set minimum price for a
good (minimum wage)

SUPPLY & DEMAND AT WORK

ADVANTAGES OF PRICE
Prices are neutral
Prices are flexible
Prices provide freedom of choice
Prices are familiar

Supply & Demand on the Move

Read the following scenarios and, in partners, decide whether
supply or demand or both will change. If they change (and
something will change in each scenario), how? Increase?
Decrease? Illustrate the change on the provided graphs. Finally,
what will happen to the equilibrium price?
1. A company has an outbreak of flesh eating bacteria in their
childrens breakfast cereal. What is likely to happen to the supply
and demand for the competing cereal Happy Flakes?
2. The price of gas doubles. What is likely to happen to the supply and
demand for bicycles?
3. The price of fish rises. What is likely to happen to the supply and
demand at Red Lobster?
4. The shoe industry sees a 25% increase in the price of leather. What
is likely to happen to the supply and demand of shoes?
5. A new pesticide is released which should help to kill off a type of
insect that attacks orange groves. What is likely to happen to the
supply and demand of oranges?
6. New study shows that pizza helps you lose weight. What is likely to
happen to the supply and demand for pizza?