Supply Law of Supply and Supply Curve Supply

Supply Law of Supply and Supply Curve

Supply Law of Supply – economic rule stating that price and quantity supplied move in the same direction -As Price goes up -Quantity Supplied goes up

Supply = Producers �Quantity Supplied �Amount of good or service that producers are willing and able to supply at a specific price. �Supply Curve �Upward-sloping line that represents the relationship between quantities supplied at possible prices Supply Schedule for CD’s Price per CD Quantity Supplied (in Millions) $10 $11 $12 $13 $14 $15 $16 $17 $18 $19 $20 100 200 300 400 500 600 700 800 900 1, 000 1, 100

Changes in Supply �The Concept of supply is producer sided. �What could factors could effect the Supply curve?

Determinants of Supply 1. Price of Inputs § Raw materials, wages for labor, price of materials needed to make a product change. 2. Number of Firms in the Industry § As more companies enter industry…more products are supplied at every price. As less enter industry = less supplied 3. Taxes § Taxes go up = More expensive to produce = Less supplied 4. Technology § Any improvement in technology will increase supply. It reduces the cost of production

Diminishing Returns Law of Diminishing Returns �As more units of a factor of production (labor) are added to other factors of production (equipment) after some point total output continues to increase but at a diminishing rate