Understanding Supply

1
Understanding Supply

• In this lesson, students will identify
  characteristics of the Law of Supply.
• Students will be able to identify and/or define
  the following terms
• Law of Supply
• Supply Curve
• Elasticity of Supply

2
Look carefully at this graph. How does price
influence supply?
3
Law of Supply

• The Law of Supply is the tendency of suppliers to
  offer more of a good at higher prices.
• Sellers love high prices.
• The Law of Supply is the opposite of the Law of
  Demand.

4
Look carefully at the curves. Do you notice that
they move in different directions? Why?
5
Why do suppliers love high prices?
6
Why is the Law of Supply True?

• Supply increases as price rises because either
  existing firms will produce more to make greater
  profits
• Or new firms will enter the market to take
  advantage of the high prices.
• Sellers love to make profits.

7
Its hard to find vinyl records
anymore. Suppliers prefer selling Compact
Discs. Suppliers go where the higher prices are.
8
Suppliers dont sell Disco anymore. There just
isnt any money in it.
9
A Supply Curve

• A supply curve is a graphic representation
  showing the tendency of suppliers to supply more
  at higher prices.
• A supply curve will always rise left to right.
• Suppliers supply more at higher prices.

10
Notice how the supply curve rises left to right.
11
Supply moves in the direction of price.
12
Elasticity of Supply

• Like Demand, Supply can be elastic or inelastic.
• In general, supply tends to be initially
  inelastic because it takes time to increase
  supply.
• However, some goods are more elastic than others.

13
Apples tend towards inelastic supply. It takes
time to grow apples.
14
The supply of haircuts can be increased more
easily.
15
Questions for Reflection

• Define the Law of Supply.
• How does the Law of Supply differ from the Law of
  Demand?
• List two goods with inelastic supply.
• List two goods with elastic supply.
• Why does supply increase as price increase?
• Why does it take time to increase supply?