Understanding Supply and Elasticity in Economics

1. Supply Chapter 5

2. An Introduction to Supply • Supply – schedule of quantities that are offered for sale at each and every price • What suppliers will supply • Anyone offering products to sell is a supplier • A person looking for a job is supplying their labor

3. Supply and the Supply Schedule • Supply schedule – data in a table format • Supply curve – data on a graph • Curve is opposite of demand • Law of Supply • Quantity supplied varies directly with its price • Change in Quantity Supplied • Quantity supplied – amount producers bring to market at one price • Change in quantity supplied – change in amount offered in response to a price change • Movement along the supply curve

5. Change in Supply • Producers offer different amounts of products at every price level • Shift in the supply curve • Reasons: • Cost of Inputs • Productivity • Technology • Number of Sellers • Taxes and Subsidies • Expectations – anticipation of future events • Government Regulations

6. Elasticity of Supply • Small change in price = large change in quantity supplied – elastic • Big change in price = small change in quantity supplied – inelastic • Proportional changes – unit elastic elastic inelastic

7. Elasticity of Supply • Determinants of Supply Elasticity • Products requiring large amounts of capital to produce are generally inelastic • Crude oil • Products needing smaller amounts of capital are elastic • Candy, kites • Comparing Demand and Supply Elasticity • Very similar