SupplySupply(The Business Point of View)(The Business Point of View)

SupplySupply(The Business Point of View)(The Business Point of View)

Another Key Economic Concept Another Key Economic Concept

The Profit Motive• The main reason, or motive,

businesses produce goods and services is to make a profit.

• Profit is the money a business makes after all its costs have been paid.

• Profits are used in a variety of ways.

What is supply?• Supply is the quantities of a good

or service that producers are willing to sell at all possible market prices.

• Supply and demand interact to determine price and the quantities of products/services that are bought and sold.

The Law of Supply• The Law of Supply states that as the

price of a good rises, the quantity supplied also rises. If the price of a good falls, the quantity supplied also falls.

In other words, price and quantity supplied move in the SAME direction.

Supply Schedule• The Law of Supply

can be represented with numbers, just like the Law of Demand

• This is an example of a Supply Schedule

Quantity Supplied

Price per video game

100 $50

90 $40

70 $30

30 $20

10 $10

1 $5

Graph the Supply Curve

• X-axis quantity supplied

• Y-axis price per video game

Y

X

Supply Curve• A Supply Curve is a graph that

shows the amount of a product that would be supplied at all possible prices.

The Supply CurveSoftware Supply Curve

$0

$10

$20

$30

$40

$50

$60

0 50 100 150

Quantity

Pri

ce p

er

Vid

eo

Gam

e

Supply Curve Shift

• What happens when the supply curve shifts to the right?

• What happens when the supply curve shifts to the left?

• Why does it shift?

The Supply Curve• What is

happening when the supply curve shifts to the right?

• The supply has increased.

The Supply Curve• What is

happening when the supply curve shifts to the left?

• The supply has decreased.

Factors That Affect Supply• Price is #1

– How much money can they make? This won’t cause a shift!

Other factors include: Other factors include: (choose ANY FOUR)• Cost of Resources• Productivity of Workers• Technology• Government Policies• Taxes• Subsidies – a government payment• Expectations• Number of Suppliers

What is it? How does it increase supply? How does it decrease supply?

STOP!!!!!!

for Understanding

1. The Law of Supply states that as the price of a good rises, the quantity supplied _________. If the price of a good falls, the quantity supplied __________.

2. What is the #1 factor that affects supply of a product?

3. What are some other factors that affect the supply of a product?

4. _____________ _____________is a measure of how the quantity supplied changes in response to changes in price.

5. Give an example of a good that is (supply) elastic.

6. Give an example of a good that is (supply) inelastic.

Supply Elasticity• Supply Elasticity is a measure of

how the quantity supplied changes in response to changes in price.

Supply Elasticity• If the quantity supplied changes a

lot in response to price shifts, the product is supply elastic.

• If the quantity supplied changes very little, the product is supply inelastic.

Supply Elasticity• Supply Elasticity depends on how

quickly a company can change the quantity of a product it makes in response to a price change.

• Oil- inelastic• Candy-elastic