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The Law of Supply

The Law of Supply. Supply  the amount Law of supply  tendency of suppliers to offer Quantity supplied  the amount a supplier is willing and As the price of a good rises, firms will produce If the price of a good falls, firms will produce. Higher Production.

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The Law of Supply

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  1. The Law of Supply • Supply the amount • Law of supply tendency of suppliers to offer • Quantity supplied the amount a supplier is willing and • As the price of a good rises, firms will produce • If the price of a good falls, firms will produce

  2. Higher Production • If a firm is already earning a profit by selling a good, then an • If the price of a good rises, but cost of making it remains the same, • Producers would try to produce more of the good to • Price goes up, you want to produce more and if the price goes down you want to produce less

  3. Market Entry • Profit appeals to producers in the market • Competition in the market is • Rap music the ability to make money “rapping” has caused in increase in the amount of rap artists

  4. The Supply Schedule • Supply schedule a chart that lists • A Supply schedule shows only the • A rise or fall in the price of a good will cause the quantity supplied to • When a factor other than the price affects output,

  5. Supply Graph and Elasticity of Supply • Supply curve a graph of the quantity supplied of a good at different prices • Horizontal axis measures the • Supply curves always rise from • Market supply curve a graph of the quantity supplied of a good by • **Helps determine total supply of a good at • Elasticity of supply a measure of the way quantity supplied

  6. Elasticity of Supply • Elastic supply supply is • Example: more pizza being produced at a higher price • A small increase in price has a • Inelastic supply supply is • Example: painting by a deceased artist • Key factor in determining elastic vs. inelastic supply • Short run supply is • Long-run supply is

  7. Short Run Elasticity • Orange grove example • If price goes up, planter could plant more trees, but he has • His supply is inelastic because • If price goes down, the planter will probably supply

  8. Long-Run Elasticity • Orange Grove Example • Over time, you can plant more trees • If the price drops and stays low, over time, the grower could • Supply becomes more elastic if the

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