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Understanding Supply

Understanding Supply. Chapter 5 Section 1. The Law of Supply. Supply – the amount of goods available Law of Supply Producers offer more of a good as its price increases and less as its price falls. Supply. Price. Why Does Supply Increase. Higher production = higher profit

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Understanding Supply

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  1. Understanding Supply Chapter 5 Section 1

  2. The Law of Supply • Supply – the amount of goods available • Law of Supply • Producers offer more of a good as its price increases and less as its price falls Supply Price

  3. Why Does Supply Increase • Higher production = higher profit • Market Entry – more want in on the business • Example – all the different pizza places in Avon

  4. Supply Schedule Can You Graph This?

  5. Supply and Elasticity • Elasticity of Supply • A measure of the way quantity supplied reacts to a change in price • More than 1 = Elastic, Less than 1 = inelastic • Equal to 1 = Unitary Elastic

  6. Supply and Elasticity • Elasticity of Supply Depends on TIME • Supply in the short run • Business have trouble adjusting to changes in price in the short term • Supply is inelastic • Supply in the long run • Over time, adjusts are made • Supply is more elastic

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