The Supply Curve Chapter 5, Section 1

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The Supply CurveChapter 5, Section 1

• Tiffany and Nandy

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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?

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Supply

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

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Law of Supply

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

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Supply Curve

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

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Checkpoint

• Explain the law of supply in your own words.
• Answer should include
• Number of goods supplied is related to price.

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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

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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.

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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

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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