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The Law of Supply and Its Impact on Markets

Learn about the law of supply, supply schedules, supply curves, and elasticity of supply. Explore how suppliers respond to price changes and factors affecting supply shifts in markets. Gain insights on market dynamics and decision-making as a producer.

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The Law of Supply and Its Impact on Markets

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  1. The Law of Supply SSEMI2a: Define the law of supply SSEMI3a: Identify and illustrate on a graph a shift in supply

  2. Price is high, supply is high. With supply: think like a producer (as opposed to demand—we think like consumers)

  3. Price As price increases… Supply Quantity supplied increases Price As price falls… Supply Quantity supplied falls The Law of Supply • According to the law of supply, suppliers will offer more of a good at a higher price.

  4. This is because: • Will produce more for a higher price • More incentive to get in the market and produce

  5. Supply Schedules • How much of a good suppliers will offer at different prices

  6. Supply curve

  7. Market Supply Schedule Price per slice of pizza Slices supplied per day $.50 1,000 $1.00 1,500 $1.50 2,000 $2.00 2,500 $2.50 3,000 $3.00 3,500 Supply Schedules • A market supply schedule is a chart that lists how much of a good all suppliers will offer at different prices.

  8. Market Supply Curve 3.00 2.50 2.00 1.50 1.00 .50 0 Supply Price (in dollars) 0 500 1000 1500 2000 2500 3000 3500 Output (slices per day) Supply Curves • A market supply curve is a graph of the quantity supplied of a good by all suppliers at different prices.

  9. If supply is not very responsive to changes in price, it is considered inelastic. An elastic supply is very sensitive to changes in price. Elasticity of Supply Elasticity of supply is a measure of the way quantity supplied reacts to a change in price.

  10. Shifts in supply • Inputs • Technology • Government: 3 things • Global economy • Future Prices • Number of suppliers

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