CHAPTER 5: SUPPLYEssential Question: How do suppliers decide what goods and services to offer?

SECTION 1: UNDERSTANDING SUPPLY Supply is the

_________________________________ How do __________ decide

__________________________to make available and _______________________?

THE LAW OF SUPPLY

DOES THE LAW OF SUPPLY MAKE ANY ASSUMPTIONS?

Yes!!! Remember ceteris paribus? No ______________ in the cost to produce the

good

THE SUPPLY SCHEDULE

Shows the relationship between ______ and ___________ (QS)

Can be graphed to form a __________________ See p. 112-113

ELASTICITY OF SUPPLY

How will firms (businesses) respond to _____________ in the ____________ of a good?

Key factor is ___________________! A lot of suppliers can’t

immediately_____________________________ Already have ___________________________ Elasticity is different in the ______________ vs.

in the ________________________ Consider the example of the orange grower

on p. 114-115

SUPPLY AND QUANTITY SUPPLIED AREN’T THE SAME THING!

Be sure you know and can explain the difference!

One is affected by ______________, one is affected by ___________________________________!

ΔS ≠ ΔQS!!!!!!!!!!

WHAT CAN CHANGE SUPPLY? (NOT PRICE!)

1. Change ____________________

Raw materials Machinery Labor

2. _________________________ Often decreases costs Newer, more efficient

equipment Robots vs. skilled

labor

3. ________________________• What do sellers expect

will happen to prices in the future?

• Some products are seasonal

• Inflation4. ______________________• Are competitors looking

to get in the market or out of the market for the good/service

WHAT CHANGES SUPPLY? ΔS ≠ ΔQS!!!!!!!!!!

WHAT CHANGES SUPPLY? ΔS ≠ ΔQS!!!!!!!!!!

WHERE DO FIRMS PRODUCE?

Depending on what a business is producing, they might need to locate their business close to where the inputs they need are produced Tomatoes & tomato sauce Soda bottlers Auto manufacturers Silicon Valley Fashion District in New York

SILICON VALLEY