Supply
is the desire and ability to produce and sell a product
two characteristics: willingness and ability
Law of supply
states that when prices decrease, quantity supplied decreases, and when prices increase, quantity supplied increases
1. Supply schedule
2. Market schedule
3. Supply curve
4. Market supply curve
1. lists how much of a good or service an individual producer is willing and able to offer for sale at each price
2. lists how much of a good or service all producers in a market are willing and able to offer for sale at each price
3. shows the data form
1. Marginal product
2. Marginal cost
3. Marginal revenue
1. the change in total output brought about by adding one more worker
2. the extra cost of producing one more unit
3. the money made from the sale of each additional unit of output; price
1. Fixed costs
2. Variable costs
3. Total cost
4. Marginal cost
5. Input costs
1. those that business owners incur no matter how much they produce
2. depend on the level of production output
3. the sum of fixed and variable costs
4. the extra cost of producing one more unit
5. the price of the resources used to make products
Why do we compare the marginal cost and the marginal revenue?
profit-maximizing output: the level of production at which a business realizes the greatest amount of profit
This level of output is reached when the marginal cost and the marginal revenue are equal.
Change in quantity supplied
:a rise or fall in the amount producers offer for sale because of a change in price
doesn't shift the supply curve
the change refers to movement along the curve itself
each point on the curve represents a new quantity supplied
a. as I move to the right al
Change in supply
:occurs when a change in the marketplace prompts producers to sell different amounts at every price
does shift the supply curve
a. a shift to the left indicates a decrease in supply
b. a shift to the right indicates an increase in supply
6 factors cause a change in supply
input cost, labor productivity, technology, government actions, producer expectations, number of producers
What is the difference between the excise tax and the regulation?
excise tax: a tax on the production or sale of a specific good or service
ex. alcohol, tobacco, things whose consumption the government is interested in discouraging
the taxes increase producers' costs and, therefore, decrease the supply of these items
re
Number of producers
When one company develops a successful new idea, other producers soon enter the market and increase the supply of the good or service.
When this happens, the supply curve shifts to the right.
An increase in the number of producers means increase competiti
Elasticity of supply
:a measure of how responsive producers are to price changes in the market place
If a change in price leads to a relatively larger change in quantity supplied, supply is said to be elastic. In other words, supply is elastic if a 10 percent increase in pric
Elastic supply
The boot makers raised the price of the boots from $60 to $150 dollars, and the quantity supplied more than kept up, escalating from 10,000 to 50,000 pairs. The producers was able to rapidly increase the quantity supplied because, the raw material needed
Elastic supply curve
slopes gradually
it slopes more horizontally than vertically because of greater changes in quantity supplied
Inelastic supply
Although gasoline price rose 20 to 30 percent between 2004 and 2005, producers were not able to increase supply by the same amount because of the limited supply of crude oil an refining capacity.
Inelastic supply curve
slopes steeply
it slopes more vertically than horizontally because of lesser changes in quantity supplied
What affects elasticity of supply?
Given enough time, the elasticity of supply increases for most goods and services.
Industries that are able to respond quickly to changes in price by either increasing or decreasing production are those that don't require a lot of capital, skilled labor,