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S U P P L Y

The different quantities that a producer or producers will make available to the market at different prices over a given period of time . S U P P L Y. LAW OF SUPPLY. As price increases , producers are willing to produce and sell more

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S U P P L Y

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  1. The different quantities that a producer or producers will make available to the market at different prices over a given period of time. S U P P L Y
  2. LAW OF SUPPLY As price increases, producers are willing to produce and sell more As price decreases, producers are willing to produce and sell less Price and Quantity Supplied are directly related
  3. PriceQuantity $4.00 1500 $5.00 1800 $6.00 2000 $7.00 2500 $8.00 3000 Supply Table Widgets Per Week

  4. Supply Graph

  5. Producer Costs Fixed Costs: Costs that don't change as production levels change Ex: Rent, Insurance, Loan Payments, Taxes Variable Costs: Costs that increase and decrease with changes in the production levels Ex: Labor costs, Materials, Utilities Total Costs = Fixed Costs + Variable Costs
  6. $1800 1700 1600 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 Total Revenue and Total Cost 0 0 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 13 13 14 14 Quantity Demanded (Sold) $500 400 300 200 100 Total Economic Profit Quantity Demanded (Sold) Total Revenue, (TR) Total Cost, (TC) Total Economic Profit
  7. 30 Total Product, TP 20 10 0 20 Marginal Product, MP 10 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 TP Increasing Marginal Returns Negative Marginal Returns Diminishing Marginal Returns AP
  8. MC $ Q Output Producer Costs Marginal Costs: The cost of the next or last unit produced Law of Diminishing Marginal Return
  9. When Supply changes, something changes the willingness of producers to produce and sell the product at each and every price. Changes in Supply
  10. Change in Production Costs Change in cost for: Materials Labor Taxes Subsidies Higher Costs = Decreased Supply Lower Costs = Increased Supply
  11. Change in number of producers in the market More Firms = Increased Supply Fewer Firms = Decreased Supply
  12. Profitability of other production options For producers, if growing corn become more profitable, Supply of soybeans will decrease, and visa-versa
  13. Expectation of futuremarket price Higher future price expected causes decreased Supply now Lower future price expected causes increased Supply now
  14. S1 S2 P $6.95 Q 150 300 Increase in Supply
  15. S2 S1 P $6.95 Q 150 300 Decrease in Supply
  16. Elasticity of Supply Compares how much Quantity Supplied changes in reaction to changes in price. Ep = Elastic > 1 Inelastic < 1
  17. Factors of Supply Elasticity Elastic Inelastic Easy to produce Difficult to produce Few different res. Many different resources
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