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Supply - 2.2

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13 views21 pages

Supply - 2.2

Uploaded by

parminderpcs
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Supply

2.2
Law of Supply
Price
• The law of supply states that as
prices increase, the quantity S
supplied increases.
• Producers/sellers determine supply
• Supply curves slope up to the right
• Once again, price doesn’t affect
supply- it affects quantity supplied
Quantity
Supply Schedule
Price
Quantity Price S
$6
20 $2.00
30 $3.00 $5
40 $4.00
$4
50 $5.00
60 $6.00 $3

$2

20 30 40 50 60
Quantity
Market Supply
Price Mike Robert Jose Market Price
Q S
$6
$1 0 2 1 3
$5
$2 1 3 2 6
$4
$3 2 4 3 9

$4 3 5 4 12 $3

$5 4 6 6 16 $2
$6 5 8 7 20 $1

2 4 6 8 10 12 14 16 18 20
In a market supply schedule, a horizontal summation of the
Quantity
quantity supplied by each firm yields the market supply
curve
Reasons for a change in
supply
• 1- Changes in the cost of production- if the cost of
producing the good increases, supply will decrease.
• If it gets cheaper to produce the good, supply will increase
• Example- if the price of gasoline increases, airlines will
decrease the supply of available flights
Reasons for a change in supply
• 2- Changes in technology- If technology makes it cheaper to
produce the good/service, supply will increase.
• This also relates to productivity- if workers get more
productive the supply of the good will increase
Reasons for a change in supply
• 3- Change in the number of
producers- an increase in the
number of producers would
increase the supply of
goods/service.
• Example- as more producers
entered the market to make
smartphones, the total supply of
smartphones increased
Reasons for a change in
supply
• 4- Change in expectations- if producers expect the
price to increase in the future they will supply less
now.
• This is the opposite of demand- as prices are
expected to increase in the future buyers want to
buy more now but producers want to supply more
later when prices increase.
S S’
Price Price
S
S’

Quantity Quantity
Increase in Supply Decrease in Supply
Price S

Equilibrium- where
p quantity demanded
equals quantity supplied

D Qd=Qs
q
Quantity
Increase in Demand Decrease in Demand
p’ Price increases Price decreases
Quantity increases Quantity decreases
p’ p’
D’
p’ D’
D’
q’
q’
q’

S’
S’
q’ Increase in Supply Decrease in Supply

S’ Price increases
Price decreases p’
p’ Quantity falls
Quantity increases
q’
p’

q’
q’ q’
Device and Internet Access

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device. We’re working on solutions to help students get what they
need to show their best work. If you need mobile tools or
connectivity or know someone who does, you can reach us
directly to let us know.

cb.org/tech

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