SUPPLYSUPPLY

DemandDemand’’s Partners Partner

SupplySupply

Is the quantity of a good or service Is the quantity of a good or service that sellers are that sellers are ableable and and willingwilling to to sell at a specific price in a particular sell at a specific price in a particular period of timeperiod of time

AbbreviationsAbbreviations

PP = price = price

QsQs = quantity supplied = quantity supplied

Law of SupplyLaw of Supply

When P , Qs When P , Qs

When P , Qs When P , Qs

How sellers think!How sellers think!

Buyers and sellers look at high and low Buyers and sellers look at high and low prices differentlyprices differently Buyers are discouraged by high prices Buyers are discouraged by high prices they they

buy less and look for substitute productsbuy less and look for substitute products Sellers are encouraged by high prices Sellers are encouraged by high prices they they

want to produce and sell more want to produce and sell more

S

Q

P

P1

P0

Qs0 Qs1

Change in PriceP

P0

P1

Q

S

Qs0Qs1

P , Qs P , Qs

Movement along the curve caused by P

A Change in PriceA Change in Price

Causes movement along the supply Causes movement along the supply curve and an curve and an in quantity supplied. in quantity supplied.

An An in quantity supplied means that in quantity supplied means that only the only the priceprice has changed and a has changed and a new quantity is supplied along a new quantity is supplied along a constant supply curve.constant supply curve.

Change in Supply – Not caused by change in Price

1. Change in environmental conditions

2. Change in technology

3. Change in resource prices

4. Change in the number of suppliers

Results in a shift of the supply curve

Change in Weather – Market for Oranges

P P

P

P

Q1 Q0 Q1Q0

Q Q

S1

S0S1

S0

Bad weather – less issupplied to the market= S

Good weather – more issupplied to the market= S

Change in Resource Prices – Market for Pork Production

P

P

Q1 Q0

Q

S1

S0

Due to increase in resource prices less is supplied to the market= S

Increased costs due to Increased:•Wages •Pig feed costs•Manufacturing costs Note: feed costs for pig farmers = an in resource prices. Therefore S

Change in Resource Prices – Market for Air Canada Flights

P

P

Q0 Q1

Q

S0

S1

Due to decrease in resource prices – more is supplied to the market= S

If workers agree to a in wages = a in Production costs, Therefore, S

“Key words” to recognize a in Supply = manufacturing, costs, inputs, wages, labour costs, production, producers

Change in Technology – Market for Cars

P

P

Q0 Q1Q

S0

S1

If a new technology makes production easier, saves time, more efficient, less labour, etc. = S

Due to decrease in production costs – more is supplied to the market= S

Change in the number of Suppliers

P

P

Q0 Q1Q

S0

S1

The creation of “The National Post” = a new supplier = S

P

P

Q1 Q0

Q

S1

S0

The acquisition of Chapters by Indigo will result in the closing of some Chapters stores = S

Market for Newspapers

Market for Bookstores

Change in S not causedChange in S not causedby a change in Priceby a change in Price

S = S curve shifts out, to the rightS = S curve shifts out, to the right

S = S curve shifts in, to the leftS = S curve shifts in, to the left

A A in Supply in Supply

A A (increase or decrease) in supply (increase or decrease) in supply or a shift in supply means that a or a shift in supply means that a change in amount supplied occurs change in amount supplied occurs because a shift in the position of the because a shift in the position of the supply curve.supply curve.