TOPIC 3: Law of Supply

Producers’

Law of Supply

The law of demand represents the consumers’ side, while the law of supply represents the _________ side.

Firms

Law of Supply

Supply describes the behavior of _________ that are producing and selling goods and services.

1) Willing

2) Able to sell

Law of Supply

Supply points out the relationship between price and the amount or quantity of goods and services that producers are 1)_________ and 2)_________ at that price, holding all other factors constant.

1) Price

2) Quantity of goods and/or services

Law of Supply

The law of supply states that the higher the 1)_________, the higher the 2)_________ that will be produced.

In the same way, the lower the 1)_________, the lower the 2)_________ that will be produced

Ceteris Paribus

Law of Supply

What Latin term refers to “holding all other factors constant.”

Quantity Supplied

Supply-Price Relationship

The supply-price relationship is expressed using the supply equation/function, which is written as:

• Q_s = c + dP

  • Where Q_s is the ________

Price

Supply-Price Relationship

The supply-price relationship is expressed using the supply equation/function, which is written as:

• Q_s = c + dP

  • Where P is the _________

Quantity supplied when the price is zero

Supply-Price Relationship

The supply-price relationship is expressed using the supply equation/function, which is written as:

• Q_s = c + dP

  • Where the term c is the intercept or the _________.

The change in quantity supplied per unit change in price

Supply-Price Relationship

The supply-price relationship is expressed using the supply equation/function, which is written as:

• Q_s = c + dP

  • The variable d is the slope of the function, which tells us _________.

Direct Relationship

Supply-Price Relationship

The supply-price relationship is expressed using the supply equation/function, which is written as:

• Q_s = c + dP

  • The positive sign (+) captures the _________ between price and quantity supplied

Qd = a - bP

The Model of Supply and Demand

What is the formula of the Demand function?

Qs = c + dP

The Model of Supply and Demand

What is the formula of the Supply function?

Equilibrium

The Model of Supply and Demand

To achieve _________ in Supply and Demand, Q_d must be equal to Q_s.

1) The entire supply curve
2) A point on the supply curve

Change in Supply and Quantity Supplied

It is referred to as a change in quantity supplied since the term “supply” refers to _________, while the term “quantity supplied” refers to _________.

1) Technology

2) Change in the Prices of Inputs

3) Price of Related Goods

4) Government Policies

Factors Affecting the Supply

What are the Factors that Affect Supply?

1) Decrease

2) More

Factors Affecting the Supply - Technology

An improvement in technology or innovation makes the production costs of a firm 1)_________; hence, 2)__________ output can be produced.

1) Prices

2) Production

Factors Affecting the Supply - Change in the Prices of Inputs

An increase in the 1)_________ of inputs such as labor costs, raw materials, land, and equipment makes the 2)_________ costs increase as well.

Left

Factors Affecting the Supply - Change in the Prices of Inputs

“An increase in the prices of inputs such as labor costs, raw materials, land, and equipment makes the production costs increase as well.”

This would make the sellers reduce the supply of their product at any given price, resulting in the supply curve shifting to the _________.

Decrease

Factors Affecting the Supply - Change in the Prices of Inputs

A _________ in the price of inputs will entice the sellers to produce more since it is less costly for them. This would make the supply curve shift to the right.

One Type

Factors Affecting the Supply - Price of Related Goods

Raw materials and other factors of production can produce not just _________ of commodity.

Same Resources

Factors Affecting the Supply - Price of Related Goods

There are commodities produced that share the _________.

Left

Factors Affecting the Supply - Price of Related Goods

“There are commodities produced that share the __________.”

Say there is a seller of puto and leche flan that shares common ingredients: sugar and condensed milk. When the price of puto decreases, the seller can utilize the ingredients and produce more leche flan, since it would be more profitable for the seller

As a result, there is a decline in the production of puto, and the supply curve will shift to the [_________].

1) Tax

2) Subsidies

Factors Affecting the Supply - Government Policies

1)_________ and 2)_________ are some of the most common government policies that could affect the production of goods and services.

1) Imposition of Taxes
2) Hinders Production

Factors Affecting the Supply - Government Policies

The 1)_________ means additional costs for the producers. Increased production cost 2)_________, making the supply curve shift to the left.

Subsidies

Factors Affecting the Supply - Government Policies

On the other hand, _________ are a form of support from the government, such as a fertilizer subsidy, that helps farmers to lessen their cost of production. This would help increase their production, making the supply curve shift to the right.