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Chapter 3-Presentation 2
SUPPLYhttp://www.youtube.com/watch?v=JWdZEumNRmI&ob=av2n
Supply
• A schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period
Law of Supply
• As prices rise, the quantity supplied rises… as prices fall, the quantity supplied falls• Direct relationship between price
and quantity supplied
Supply Curve
• Upward sloping from left to right showing that as the price increases, companies are willing to provide more of good in order to increase profit
• Remember--- “supply to the sky”• ***y-axis is price, x-axis is quantity supplied• Be sure to label supply curve S, S1, S2 etc.
Individual Supply 6
5
4
3
2
1
0
Quantity Supplied (bushels per week)
Pric
e (p
er b
ushe
l)
P Qs
$5
4
3
2
1
60
50
35
20
5
IndividualSupply
P
Q
S1
Supply Can Increase or Decrease
S2
S3
An Increase in SupplyMeans a Movementof the Line
A Movement BetweenAny Two Points on a
Supply Curve is Called a Change in Quantity
Supplied
2 4 6 8 10 12 14
Determinants of Supply
• R- Resource Prices- Inputs that go into making a g/s• O- Other Goods’ Prices - Substitutes (milk/cheese) in
production and joint products (mulch/lumber)• T- Taxes and Subsidies• T – Technology Change- increased/decreased
efficiency• E- Expectations of Suppliers- expect. of future prices• N- Number of Sellers- more suppliers = higher S
Equilibrium Price
• The price where the intentions of buyers and sellers meet• Quantity Demanded = Quantity
Supplied
Equilibrium Quantity
• The quantity demanded = quantity supplied• QD and QS at the equilibrium price
Equilibrium Price and Quantity
• Equilibrium exists where the two graphs meet
Graph: Increase in demand, supply constant (New E price? Quantity?)• Equilibrium Price: • Equilibrium Quantity:
Graph: Decrease in Supply, Demand stays Constant (New Equilibrium Price/Quantity? )
• Equilibrium Price: • Equilibrium Quantity:
People Suddenly prefer Fords over VW
• Price: • Quantity:
The Price of cheese goes down, show the effects on the pizza industry
• Equilibrium Price: • Equilibrium Quantity:
People for Some Reason move away from Cleveland
• Equilibrium Price: • Equilibrium Quantity:
Government Raises Business Taxes
• Equilibrium Price: • Equilibrium Quantity:
Consumers in May Expect a Drought in August Hurting Oranges• Equilibrium Price: • Equilibrium Quantity:
Labor Unions Negotiate Higher Wages for Auto Workers
• Equilibrium Price: • Equilibrium Quantity:
• Supply Increase; Demand Decrease• Supply Decrease;
Demand Increase• Supply Increase;
Demand Increase• Supply Decrease;
Demand Decrease
Tough OnesPrice Quantity
?
?
?
?
Shortage
• The amount the QD exceeds the QS at a certain price (below equilibrium)
Price Floor
• A minimum price fixed by the government
• A price at or above the floor is legal, but anything below it is illegal
• Ex- Minimum Wage, Agricultural prices
Price Ceiling
• A maximum price a seller may charge for a product or service• Ex- rent controls
Market Equilibrium 6
5
4
3
2
1
0 2 4 6 8 10 12 14 16 18Bushels of Corn (thousands per week)
Pri
ce (
per
bu
shel
)
P Qd
$5
4
3
2
1
2,000
4,000
7,000
11,000
16,000
MarketDemand
200 BuyersP Qs
$5
4
3
2
1
12,000
10,000
7,000
4,000
1,000
MarketSupply
200 Sellers
200 Buyers & 200 Sellers
7
3
D
S
$4 Price Floor
6,000 BushelSurplus
Market Equilibrium 6
5
4
3
2
1
0 2 4 6 8 10 12 14 16 18Bushels of Corn (thousands per week)
Pri
ce (
per
bu
shel
)
P Qd
$5
4
3
2
1
2,000
4,000
7,000
11,000
16,000
MarketDemand
200 BuyersP Qs
$5
4
3
2
1
12,000
10,000
7,000
4,000
1,000
MarketSupply
200 Sellers
200 Buyers & 200 Sellers
7
3
D
S
$2 Price Ceiling
7,000 BushelShortage
