CHAPTER 5—THE SUPPLY

CHAPTER

5.1 “What is supply?”

2 Curves—Supply & Demand:

Which one is which?

Why does supply increase as price increases?

Let’s think about it. If you could tutor a kid after school, would you do

it for… $1/hr? $5/hr? $7.50/hr $10/hr? $20/hr?

If yes, is this price high enough where you would be willing to work more than 1 hr/week? How about 5 hours at this price? Or 20 hours?

$30/hr? $50/hr? $100/hr? $250/hr?

Duh

The supply of students willing to stay after school for $250/hr is much greater than the supply

willing to stay for $1/hr

Does supply apply only to labor? In other words, as the price increases,

would the production of GOODS also increase?

Personal Examples

SUPPLY SCHEDULE

OR

SUPPLY CURVE?

Classwork Ch. 5.1 Definition

Subsidy Identify and briefly describe the 7 reasons

why changes in supply occur (p. 116-118).

What would cause THIS to happen?

Reasons for Change in Supply? Cost of Inputs Productivity Technology Taxes and Subsidies Expectations Government Regulations Number of Sellers

Supply Elasticity If a small increase in price leads to a

relatively larger increase in output, supply is ____________.

ELASTIC INELASTIC

Difference between demand & supply elasticity? Not much D.E. – quantities are being purchased S.E.– quantities are brought to market for sale Don’t forget: Elasticity is simply a measure of

the way quantity adjusts to a change in price.

I need a… Explain why the first is

inelastic and the second is elastic.

Tickle Me Economics Dec. 1996: Tickle Me Elmo was the

hottest toy of the season Regular price--$23.99; Advertised in

newspapers for as much as $500 Did the company want to supply more? Since manufacturing could not keep up

with the demand, there was a temporary ____________ of supply.INELASTICITY

The supply curve for products that can be made quickly without huge amount of

capital and skilled labor is ________.

ELASTIC Kites, candy, etc.

INELASTIC Planes, shale oil

***Unlike demand, ONLY production considerations determine supply elasticity.***

(Substitutes, ability to delay purchase, etc. are not important for supply elasticity)

Finally (for this section)… Unit Elastic Supply

KEY WORD: PROPORTIONAL (change)

AND NOW…

SOME OF THEN…

“THE MICHIGAN ADVANTAGE”