Chapter 5 Supply
Chapter 5 Supply
Chapter 5 Supply
Law of Supply
Suppliers (Producers) will offer more goods and services for sale at higher prices and less at low prices.
Graphing Supply
Supply Schedule Listing of various quantities of a particular product supplied at all possible prices in the market. Supply Curve - Graph that illustrates the various quantities of a product offered at various prices - always slopes upward.
GRAPHING SUPPLY
Price of Corn
$5
P QS $5 4 3 2 1
Q
60 50 35 20 5
GRAPHING SUPPLY
Price of Corn
$5
CORN
P QS
60 50 35 20 1 5
Q
10 20 30 40 50 60 70 80 Quantity of Corn
GRAPHING SUPPLY
Price of Corn
$5
Increase in Supply
S
CORN
in Quantity Supplied
10 20 30 40 50 60 70 80 Quantity of Corn
P QS 80 $5 60 70 4 50 60 3 35 45 2 20 Increase 30 1 5
Q
GRAPHING SUPPLY
Price of Corn
$5
CORN
P QS $5 4 3 2 1
Q
60 50 35 20 5
GRAPHING SUPPLY
Price of Corn Decrease
$5
in Supply
S S
CORN
10 20 30 40 50 60 70 80 Quantity of Corn
Supply Elasticity
Just as for Demand, Supply also has 3 different elasticity levels. Elastic Production can easily increase due to a change in price (Candy, Toys, Textiles) Inelastic Production stays roughly the same even though prices are increasing (Oil, Natural Gas) Unit elastic Production increase is proportional to price change
Measures of Cost
Fixed Costs (Overhead) Costs such as rent and interest. They do not change from month to month, or in some cases, year to year. Variable Costs Costs that fluctuate based on output or production. Total Costs Variable + Fixed
Revenue
Total Revenue - # of units sold multiplied by the average price per unit. 7units X $15 = $105 in Total Revenue