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Intros
Lessons
  1. Supply Overview
  2. Supply Terminology
    • What it means have supply
    • Definition of Supply
  3. Supply Curve
    • Positive relationship between price and quantity
    • Law of Supply
    • Why Supply is Upward Curve
    • What it looks like graphically
    • What it looks like algebraically
  4. Change in Supply
    • Increase in supply
    • Decrease in supply
    • Factors for Change in Supply
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Examples
Lessons
  1. Understanding the Law of Supply & Definitions
    When a firm supplies a good or service, then:
    1. The firm has the resource and technology to product it
    2. The firm profits from making it
    3. The firm is definitely making it and selling it
    4. All of the above
  2. Which of the following explains why the supply curves have positive relationships between price and quantity supplied?
    1. The higher the price of the good, the more consumers will buy the item
    2. The higher the marginal cost, the more the companies will produce the good. This gives more supply to the economy.
    3. The higher the price of the good, more firms will produce and sell because any higher opportunity costs can be covered by the higher price.
    4. None of the above
  3. Using the Supply Curve
    Using the follow information from the table, graph the demand curve.

    Quantity Supplied (Chocolate)

    Price (dollars)

    5

    1

    10

    2

    16

    3

    23

    4

    31

    5

    1. Understanding the Change in Supply
      Which factor effects the following events of the supplies, and what does it do to the supply curve?
      1. The minimum wage of workers rises.
      2. The price of candies rises.
      3. A new technology lowers the cost of production of new clothes.
    2. Suppose a tornado unfortunately went to your area of production, damaging all your resources and supplies. The supply becomes very scarce, but the price of the good stays the same. Will firms compensate and try to supply the same quantity as before? Why or why not?
      Topic Notes
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      Supply Terminology

      When a firm supplies a good or service, then you assume 3 things:
      1. The firm has the resource and technology to produce it.
      2. The firm profits from making it.
      3. The firm is definitely making it and selling it


      The quantity supplied of a good or service is the amount that producers plan to make and sell during a time period at a specific price.


      Law of Supply and Supply Curve


      Law of Supply: the higher the price of a good, the bigger the quantity supplied. This also happens vice versa.


      The supply curve function is QsQ_{s} = a + bP, where
      1. P is the price of the good or service
      2. QsQ_{s} is the number of quantity supplied

      Note: The supply curve is the same as the marginal cost curve we’ve seen last chapter.
      Supply curve function
      Two reasons why the curve is upward sloping:
      1. Increasing Opportunity Cost: The higher the price, more firms are willing to produce and sell because any higher opportunity costs can be covered by the higher price. Thus, more products are supplied.
      2. Rising Marginal Cost: the more units are produced, the higher the marginal cost of production. So firms need to make sure that the extra addition unit cost is covered by the higher price in order to make profit.

      Change in Supply

      The supply curve can either shift rightward or leftward. Reasons why supply curves can shift:
      1. Prices of Factors of Production: if the prices for factors of production increases, then it becomes more costly, causing producers to produce less of the supply at the price. This shifts the supply curve to the left.
      2. Prices of Related goods produced: prices of related goods which firms make influence supply.
        1. Substitutes: Suppose good x and y are substitutes. If the firm is producing good x, and the price of good y increases, then the firm switches to good y, causing the supply of good x to decrease.
        2. Complements: Suppose good x and y are complements. Then increasing the price of good x will increase the supply of good y.
      3. Expected future prices: If the price of a good is expected to rise in the future, then the supply of the good today decreases. This causes the supply curve to shift leftward.
      4. Number of Suppliers: The more supplies there are, the greater the supply of the good. This increases the number of supplies, which shifts the supply curve right.
      5. Technology: Advancement in technology lowers the cost of producing, which means suppliers will produce more of the product. This shifts the supply curve to the right.
      6. State of Nature: Any natural disaster that can influence the production, or damage the supply will lower the amount of supply. This decreases the amount of supply, which shifts the supply curve leftward.
      Supply curve shift rightward or leftward