Supply

demand: buying side of the market

supply: the selling side of the market

supply schedule: table of prices and quantities supplied

supply curve: graph of prices and quantities

supply schedule

For every $2 increase in price, Q_s increases by 5 → linear relationship

Law of supply: there exists a positive relationship between price and quantity supplied

• supply curve slopes upward- price and quantity go in same direction

exceptions

1. fixed supply: supply can’t increase even if prices rise

2. agriculture: once crops are planted, farmers can’t quickly adjust supply

3. labor: at higher wages, some workers choose to work less

function

Q_s = c + dP

c: quantity supplied when price is zero

d: how much Q_s rises for each one-unit increase in P

supply as marginal cost

height of the supply

move along the curve- caused by change in good’s own price

shift of the curve- change in any non-price factor

individual supply: how mcuh one firm is wiling to sell at each price

market supply: how much all firms are willing to sell at each price

• horizontal sum of individual supply curves (Q_s¹ + Q_s²…)

• DON’T ADD PRICES!!! ONLY Q

1. find minimum willingness to sell of A and B

   1. P(Q_A = 0): 0 = 2p -10 → p = 5

   2. P(Q_B = 0): 0 = 2p - 6 → p = 3

/

0 ——— 3 —— 5 ——-

$\displaylines{=0,P<3\\ =2P-6,3\le P<5\\ =4P-16,P\ge5}$

change in supply curve

1. input prices: if costs increase, supply will decrease, curve shift left

2. technology: improvements make production more efficient, curve shifts right

3. number of sellers: increases in sellers increase total supply

4. expectations: if something might change in the future, may change prices and supply

5. natural conditions: weather, climate, and natural disasters

6. government policies

   1. taxes: increase production costs, firms supply less

   2. subsidies: lower production costs, firms supply more

   3. regulations: laws raise costs, deregulation lower costs

   4.