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Understanding Supply. Chapter 5 Section 1. The Law of Supply. Supply – the amount of goods available Law of Supply Producers offer more of a good as its price increases and less as its price falls. Supply. Price. Why Does Supply Increase. Higher production = higher profit

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understanding supply

Understanding Supply

Chapter 5 Section 1

the law of supply
The Law of Supply
  • Supply – the amount of goods available
  • Law of Supply
    • Producers offer more of a good as its price increases and less as its price falls

Supply

Price

why does supply increase
Why Does Supply Increase
  • Higher production = higher profit
  • Market Entry – more want in on the business
    • Example – all the different pizza places in Avon
supply schedule
Supply Schedule

Can You Graph This?

supply and elasticity
Supply and Elasticity
  • Elasticity of Supply
    • A measure of the way quantity supplied reacts to a change in price
    • More than 1 = Elastic, Less than 1 = inelastic
      • Equal to 1 = Unitary Elastic
supply and elasticity1
Supply and Elasticity
  • Elasticity of Supply Depends on TIME
    • Supply in the short run
      • Business have trouble adjusting to changes in price in the short term
        • Supply is inelastic
    • Supply in the long run
      • Over time, adjusts are made
        • Supply is more elastic