law of supply

one of the main reasons people go into business is to make a ___________

profit

the total revenue a firm receives from selling its product minus the total cost of producing it

profit

usually the ____________ you supply the more profit you can make

more

the amount of a good that firms are willing to supply at a particular price over a given period of time

quantity supplied

with demand you think like a _______________

consumer

with supply you need to think like a ____________

producer

so the _____________ the price the more a producer is willing to supply because they can make a higher _____________

higher; profit

what is the law of supply?

price goes up, supply goes up

price goes down, supply goes down

supply and price has a _______________ relationship since they move in the same direction

positive

a table list the quantity of the good that will be supplied a specified prices

supply schedule

a graphical representation of the supply schedule, showing the quantity the firm will supply at each price

supply curve

a graphical representation of the quantity supplied at various prices by ALL prices

market supply curve

when there are many firms selling identical good, firms are free to enter and exit the market, and consumers have full information about the price and availability of goods

perfect competition

4 conditions of perfect competition

every unit of the good sold in the market is identical

the good is produced by many firms

new firms that want to supply the good are free to enter the market and existing firms are free to stop supplying the good

consumers are aware of the price charged by the various firms and have the opportunity to buy from the firm of their choosing

measure of the responsiveness of the quantity supplied to price changed

elasticity of supply

supply is very sensitive to price change (usually things that are not needed)

elastic

supply is not very sensitive to price change (usually things that are not needed)

inelastic

what is the law of demand?

price goes up, demand does down

price goes down, demand goes up

demand and price have a ________________ relationship since they move in opposite directions

negative

when there is a price change, there will be ____________ on the graph

movement

when there is not a change in price, there will be a ___________ on the graph

shift

if demand decreases without a price change, the curve will shift to the ________

left

if demand increases without a price change, the curve will shift to the __________

right

5 factors that could cause a shift in demand

taste

income

price of related goods

expectations

number of buyers

the result of a change in the quantity supplied at every price, price does not change

shift of the supply curve

when the supply curve shift (price stayed the same, but the more or less of the product is supplied)

change in supply

when there is a movement along the supply curve (movement means the price changed)

change in the quantity supplied

a decrease in supply the curve will shift to the ________

left

an increase in supply, the curve will shift to the __________

right

6 factors that could cause a shift in the supply curve

cost of inputs

government policies

number of firms

technological changes

natural disasters

expectations about future prices

_________________ consist of goods that are held in storage temporarily

inventory

inputs that cannot be changed

fixed inputs

inputs that can be changed

variable inputs

indicates the inputs needed to produce different quantities of output

production schedule

the amount by which total output increases when one more worker is hired

marginal product of labor

describes the decrease in the marginal product of a variable input such as labor as more and more of it is combined with a fixed input such as equipment

diminishing marginal returns

a general tendency for total output to increase at a decreasing rate when additional amounts of a input are used in production, holding the amount of other input constant

law of diminishing returns

the cost of inputs that do not vary with the amount of output produced (example: rent for a building)

fixed cost

the cost of inputs that do vary with the amount of output produced (example: wages for employees)

variable cost

fixed cost + variable cost =

total cost

the additional cost of doing something one more time

marginal cost

the additional revenue a firm receives from selling another unit of output

marginal revenue

a shift to the left of a supply curve is caused by:

a increase in the cost of an input

use the “Supply of coconuts” figure 6-1. if the price of coconut decreases, then the movement that would take place in the model could be:

A to B

use the “Supply of coconuts” figure 6-1. if there is an improvement in the technology used to harvest coconuts (e.g., a faster, less expensive coconut picker), then the movement in the model could be:

A to C

use the “Supply of coconuts” figure 6-1. if the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts are increasing, then the movement in the model could be:

C to A

over the past few years the technology associated with producing flat-panel televisions has improved. this has led to a(n) _____________ in _____________ flat-panel televisions

increase; the supply of

milk is an important ingredient in the production of ice cream. if the price of milk increases, then one would expect, holding all other things constant:

the supply curve for ice cream to shift left

a decrease in supply means:

a shift to the left of the entire supply curve

consider the supply curve for cotton shirts. an increase in the price of cotton will:

decrease the supply of cotton shirts

the typical supply curve illustrates that:

other things equal, the quantity supplied of a good is positively related to the price of a good