Chapter 5: SupplySection 1Chapter 5: SupplySection 1
Chapter 5: SupplySection 1Chapter 5: SupplySection 1
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Chapter 5, Section 1
Objectives
Objectives
1.Explain the law of supply.
2.Interpret a supply schedule and a supplygraph.
3.Examine the relationship betweenelasticity of supply and time.
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Chapter 5, Section 1
Introduction
Introduction
–As prices rise, producers will offer more of agood and new suppliers will enter the marketin the hopes of making a profit.
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Chapter 5, Section 1
What is the Law of Supply?
What is the Law of Supply?
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Chapter 5, Section 1
Market Entry
Market Entry
–Rising prices encourage new firms to join themarket and will add to the quantity supplied ofthe good.
–DO NOT WRITE
–Take, for example, the music market:
•When a particular type of music becomespopular, such as 70’s disco or 90’s grunge,more bands will play that type of music in orderto profit from such music’s popularity.
•This action reflects the law of supply.
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Chapter 5, Section 1
The Supply Schedule
The Supply Schedule
–A supply schedule shows the relationship betweenprice and quantity supplied for a particular good.
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Chapter 5, Section 1
The Supply Graph
The Supply Graph
•A supply schedule can be representedgraphically by plotting points on a supply curve.
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Chapter 5, Section 1
Elasticity of Supply
Elasticity of Supply
•Elasticity of supply, based on the sameconcept of elasticity of demand, measureshow firms will respond to changes in theprice of a good.
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Chapter 5, Section 1
Elasticity in the Short Run
Elasticity in the Short Run
•In the short run, it is difficult for a firm to changeits output level, so supply is inelastic.
•In the long run, supply can become more elastic.
