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ECONOMICS TOPIC 3 LESSON 4
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  • Slide 1
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    ECONOMICS TOPIC 3 LESSON 4

    Fundementals of Supply

  • Slide 2
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    ESSENTIAL QUESTION

    How do we affect the economy?

  • Slide 3
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  • Slide 4
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    The Effect of Price on Supply

    Just as the relationship between price and demand is governed by basic economic law, supply and price are directly linked. We will now explore the ways in which changes in price affect supply.

  • Slide 5
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  • Slide 6
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    Suppliers Follow the Law of Supply


    Supply is the amount of a good or service that is available.

    According to the law of supply, producers offer more of a good or service as its price increases and less as its price falls.

    Economists use the term quantity supplied to describe how much of a good or service a producer is willing and able to sell at a specific price.

  • Slide 7
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    The Effect of Price on Production


    If a firm is already earning a profit by selling a good or service, then an increase in the price—ceteris paribus—will increase the firm’s profits. The promise of higher revenues generated by each sale encourages the firm to produce more. 

  • Question 8
    Ungraded
    180 seconds
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    Q.

    The price of a good determines how much of that good a supplier will provide. Contrast How is the law of supply different from the law of demand?

  • Slide 9
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    The Effect of Price on Number of Suppliers

    One of the benefits of the economic system of the United States, with its emphasis on free markets, is that markets are open to new suppliers. Entrepreneurs can enter growing markets to respond to these trends as long as they can assemble the needed factors of production and are willing to take the risk.

  • Question 10
    60 seconds
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    Q.

    Generate Explanations Which factor causes firms to increase production when the price of a good or service goes up?

    answer choices

    desire for profits

    increase in demand

    need to unload inventory

    reduction in costs

  • Slide 11
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    Understanding Supply Schedules

    Similar to a demand schedule, a supply schedule shows the relationship between price and quantity supplied for a specific good or service, or how much of a good or service a supplier will offer at various prices. 

  • Slide 12
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  • Slide 13
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    Changes in the Quantity Supplied

    Economists use the word supply to refer to the relationship between price and quantity supplied, as shown in the supply schedule. 

  • Question 14
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    180 seconds
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    Q.

    This schedule shows how many slices one pizzeria owner will supply at different prices. Analyze Charts What would you expect from this pizzeria if prices rose to $7 a slice?

  • Slide 15
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    All Suppliers and the Market Supply Schedule

    All of the supply schedules of individual firms in a market can be added up to create a market supply schedule. A market supply schedule shows the relationship between prices and the total quantity supplied by all firms in a particular market. 

  • Slide 16
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    The Supply Graph

    When we graph the data points in the supply schedule, we create a supply graph—also known as a supply curve. A supply curve is a graphic representation of a supply schedule. A supply curve is very similar to a demand curve, except that the horizontal axis now measures the quantity of the good supplied, not the quantity demanded. 

  • Question 17
    Ungraded
    180 seconds
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    Q.

    Analyze Graphs a. How much pizza will the individual pizzeria supply per day at $3 a slice? b. How much pizza will the market supply each day at $4 a slice?

  • Question 18
    60 seconds
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    Q.

    Check Understanding Which variables does a supply schedule show?

    answer choices

    quantity demanded and price

    quantity demanded and quantity supplied

    quantity supplied and price

    quantity supplied by individual firms and the market

  • Slide 19
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    Elasticity of Supply

    measures how firms will respond to changes in the price of a good or service.

  • Slide 20
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  • Slide 21
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    Elasticity of Supply Over a Short Time

    An orange grove is one example of a business that has difficulty adjusting to a change in price in the short term. Orange trees take several years to mature and grow fruit. If the price of oranges goes up, an orange grower can buy and plant more trees, but he will have to wait several years for this investment to pay off. 

  • Slide 22
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    Elasticity of Supply Over a Longer Time

    Like demand, supply becomes more elastic over time. The orange grower could not increase his output much when the price of oranges rose, but he can plant more trees to increase his supply over time. After several years, he will be able to sell more oranges at the higher price.

  • Question 23
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    180 seconds
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    Q.

    Apply Concepts How is a business that is highly elastic respond to a drop in prices?

  • Question 24
    60 seconds
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    Q.

    Compare and Contrast Which of the following explains why firms differ in elasticity of supply in the short term?

    answer choices

    quality of decision-making

    ease of changing quantity supplied quickly

    inability to understand the law of supply

    changes in market demand

  • Question 25
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    180 seconds
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    Q.

    How do we affect the economy?

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