HGov-APMacro: Supply and Changes in Supply

Learning Target: Explain how supply represent economic activity and describe the factors that cause supply to shift.

Supply, like demand, is another important concept. Supply is defined as the quantities of output that producers will bring to market at each and every price. Like demand, supply can be presented in the form of a supply schedule, or graphically as a supply curve. Individual producers have their own supply curves, and the market supply curve is the sum of individual supply curves.

The Law of Supply states that more output will be offered for sale at higher prices and less at lower prices. A change in quantity supplied is represented by a movement along the supply curve, whereas a change in supply is represented by a shift of the supply curve to the left or right.

Supply elasticity is a measure of how responsive producers are to change in price. Supply elasticity is influenced by such factors as the availability and mobility of inputs, a producer’s storage capacity, and the time needed to adjust to a price change. A producer whose supply is elastic will likely respond to an increase in price with an increase in quantity supplied. A producer whose supply is inelastic is unable to respond to changes in price.

A supply curve shows all the prices and quantities at which producers are willing and able to sell a good or service. Producers want to sell more at a higher price and less at a lower price.

Changes in supply, STORES, are caused by changes in: Subsidies or taxes (government action), Technology/productivity, Other events or natural disasters, Resource costs, Expectation of change in future prices (profit), and Size of the producer market. Supply elasticity describes how producers will change the quantity they supply in response to a change in price.

A supply curve is the graph that shows the relationship between price and quantity. There is a difference between a change in supply and a change in quantity supplied. A change in quantity supplied is a movement along the supply curve and can be caused only by a change in the price of the good or service. At a lower price, a smaller quantity is supplied. A change in supply is a shift of the curve whereby more or less is supplied at every price. A change in technology, in production costs or in the number of sellers (firms) will cause a change in supply. When a business wants to expand, it has to consider the law of diminishing returns to decide how much expansion will help the business.

Read McConnell & Brue Chapter 3 pages 50-53


Econ: IES Trade Session


IES Mini Summit
Student teams representing the nations of the world implement their strategic plan through activities such as negotiating country trade alliances, investing in long term development projects, interacting with global economic institutions (Summit World Bank), receiving foreign aid, and participating in an international export-import trading session.