The Supply Curve Chapter 5, Section 1

Tiffany and Nandy

Pre-Questions
Why should the quantity of winter jackets supplied increase when there is an increase in the price of these jackets?
Why is the price elasticity of supply likely to be greater for wooden bowls than for natural pearls?

Supply
A relation showing the quantities of a good producers are willing and able to sell at various prices during a given period.

Law of Supply
States that the quantity of a good supplied during a given time period is usually directly related to its price.

Supply Curve
A curve of line showing the quantities of a particular good supplied at various prices during a given time period.

Checkpoint
Explain the law of supply in your own words.

Answer should include: Number of goods supplied is related to price.

Elasticity of Supply
A measure of the responsiveness of quantity supplied to a price change; the percentage change in quantity supplied divided by the percentage change in price. Elasticity of supply= Percentage change in quantity supplied Percentage change in price

Checkpoint
What does the elasticity of supply measure, and what factors influence its numerical value? Answer should include: Measures price changes. Factors are the percentage change in quantity supplied and percentage change in price.

Review Questions
Which of the following best defines the law of supply? a. The lower the price, the smaller the quantity supplied. b. The lower the price, the greater the quantity supplied. c. The higher the price, the smaller the quantity supplied. d. None of these choices. If the price of avocados increases, a deli that makes guacamole (made from avocados) would most likely ________ their supply. a. increase b. decrease c. make no changes to d. It cannot be determined from the information given Suppose that the price of a hamburger at Casa Burger increases from $3 to $4. The quantity supplied increases from 12 million to 15 million. Which of the following is the elasticity of supply? a. 0.55 b. 1.0 c. 1.2 d. 1.8

Review Questions
Suppose that dairy farmers expect the price of their products (milk, cheese, etc.) to increase in the near future. Which of the following actions would the producers most likely take? a. They would probably do nothing. b. They would store all of the milk they produce now. c. They would take steps to decrease production capacity immediately. d. They would work to increase production capacity immediately. Improvements in technology cause a leftward shift in the supply curve. a. True b. False Answers: A, B, D, D, B