Supply Basics

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Supply Basics

• Professor Jermaine Whirl
• Information to be use by students of East Georgia
  College

Permission to reproduce or copy all or parts of
this material for non-profit use is granted on
the condition that the author and source are
credited. (Thanks Dr. Stonebraker)
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Supply Theory(Producer Theory)

• Supply is a schedule of equilibrium prices and
  quantities that satisfy the producer's utility
  profits.
• Supply is the willingness and ability to sell
  goods and services at a particular price,
  quantity, time, and location other things held
  constant.

• Supply is upward sloping in respect to prices.
• The law of supply states that as prices increases
  the quantity supplied to the market increase
  Vice Versus as well!

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Supply Graphical Setup
Price
S
Red Curve is the Supply Curve
Positive Slope
Quantity
Supply Curves are always Upward Sloping
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Some Things to Note At a price of 0.00 Nike is
willing to sell 0 Hats At a price of 12.00 Nike
is willing to sell 12 hats. At a price of 6.00
Nike is willing to sell 6 hats. Notice as the
price increased, Nike is willing looks able to
sell more Hats. (Law of Supply)
Quantity Prices 0 0.00 2 2.00 4 4.00 6
6.00 8 8.00 10 10.00 12 12.00
S
12
Supply Schedule
Price
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Important Note As Nike moves up and down the
curve its Quantity Supplied (amount Nike wants to
sell is moving) depending on the change in
price. Refer to Page 47 in Text!
0.00
6
12
Quantity
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Changes in Supply (Dynamic Movements)
The Red Curve is the Beginning Supply Curve. The
purple Curve represents an increase in Supply
(shift to the right) The Green Curve Represents a
decrease in Supply (shift to the left)
The Supply Curve is a living curve that is never
constant. It's always moving, because of Supply
Shifters.
S2
S
S1
Prices
Quantity
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What are supply Shifters?

• Technology
• Expectations
• Input Costs
• Number of Sellers in market
• Profitability of other goods.

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Supply Price

• The Supply Price is the lowest price sellers
  would be willing to sell the last unit of
  quantity for.
• Remember the supplier has overhead costs like
  (fixed cost such as rent that he must pay for).
• Therefore, the supply curve never truly begins
  from the origin.

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True Supply Curves
In this class we use linear supply curves to make
life simpler on the two dimensional white board.
But in reality most supply curves are
non-linear. Linear curves have a basic rise/run
format. Therefore, If prices rise by 2 the
producer will always sell 2 more of a good or
service. In fact producers don't sell products
like that. For some of them if the price increase
by 2 would sell 10.
Supply Curves are always upward sloping.
S
P
Q