Unit One: Chapters 3 and 4- SUPPLY and Demand

SUPPLY

Notes from (1/12/16)

Supply- The quantities that produces or sellers are willing and able to produce at various prices.

The Law of Supply- There is a direct relationship between price and quantity.

-As Price INCREASES, Quantity INCREASES. As Price DECREASES, Quantity DECREASES.

QUESTION?- What causes a "change in quantity supplied"?

ANSWER- ∆ in price! 

QUESTION?- What causes a "change in supply?"

ANSWER- There are 6 reasons!

1.) ∆ in Weather (Drought, Natural Disaster, etc.)

2.) ∆ in Number of Sellers

3.) ∆ in the Costs of Production

4.) ∆ in Technology

5.) ∆ in Expectations

6.) ∆ in Taxes of Subsidies*

*Subsidies- Money provided by the government

SHOULD KNOW'S

-Supply Curve Shift LEFT means supply DECREASES.
-Supply Curve Shift RIGHT means supply INCREASES.

PANEL (a) SHOWS: An INCREASE in Technology, Subsidies, Weather, and Number of Sellers and a DECREASE in Cost of Production and Taxes.

PANEL (b) SHOWS: An INCREASE in Cost of Productions and Taxes and a DECREASE in Technology, Subsidies, Weather, and Number of Sellers.  

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