ecom supply text

Law of Supply: The principle that Producers will supply more of a product or service at higher prices, but less of a product or service at lower prices. (this relates to Quantities Supplied)



Supply: the amount of goods and services that Producers are willing and able to supply at various possible prices at a given time.


Quantity Supplied: the amount of a good or service the Producers are willing and able to supply at a particular price. (these are the points on the curve)


Below: Both the Supply Schedule and the Supply Curve show specific combinations of Price and Quantity Supplied.


Supply Schedule: a table that lists each quantity of a product that Producers are willing to supply at various prices.


Supply Curve: a graphic representation of a supply schedule showing the relationship between the price of an item and the quantity supplied during a given time period. 

 

Profit Motive: the desire to make money.


Profit motive has a great impact in free-enterprise markets.  It governs how Producers make decisions and how resources are used in the entire economy.


Profit:  the amount of money remaining after producers have paid all of their costs.


Costs for Producers include wages, salaries, rent, interest on loans, bills for utilities, raw materials, and any other goods or services used to manufacture a product.


Determinants of Supply

Producer Expectations

  • Price of Resources

  • Government Tools

    • Taxes

    • Regulations

    • Subsidies (government payments to producers)

  • Technology

  • Competition

  • Prices of Related Goods

  • Producer Expectations



Elasticity of Supply


The law of supply, supply schedules, and supply curves all point out the relationship between prices and quantities supplied.


But, how much of a change in Price causes how much of a change in quantities supplied?


Elasticity of Supply: The degree to which price changes affect the quantity supplied.



Elastic Supply: When a small change in price causes a major change in quantities supplied


  • Quickly

  • Inexpensively

  • readily available resources


Inelastic Supply: When change on a good’s price has little impact on quantities supplied.


  • Time

  • Money

  • Resources not readily available