Mr.

Rey Belen

Supply is the willingness and ability to

sell a range of quantities of a good at a
range of prices, during a given time.

Willingness and ability.

Range of quantities and prices.
A given time period.

Supply price is the minimum price that

sellers would be willing and able to accept
for a given quantity of a good.
Sellers have a lower limit on the price that they
would be willing and able to accept for a good,
compared to the upper limit of the demand
price.
Sellers are willing and able to accept a higher
price. In fact, they would be glad to sell a good
for a billion dollars... or more.
The minimum supply price is based on the fact
of economic life that people prefer more to less.

Quantity supplied is the specific quantity

of a good that sellers would be willing
and able to sell at a specific price.
Price and quantity supplied are a pair of
numbers that go together.
Quantity supplied is not the same as supply.
Supply is the entire range of prices and
quantities (all pairs of numbers).
Quantity supplied is a specific quantity at a
specific price (a quantity paired with a price).

Supply as the range of prices and quantities that

sellers are willing and able to sell at different
prices.
Sellers must be both willing and able to sell a
good to have a supply. While willingness can
influence some supply, ability, which is based on
production cost, is more important.
Supply includes a range of prices and quantities,
not just a specific quantity.
Supply is analyzed during a given time period.
Supply price as the minimum price sellers would
be willing and able to accept for a given quantity.
Quantity supplied is the specific quantity sellers
would be willing and able to sell at a specific price.

The law of supply is a direct relationship

between supply price and the quantity
supplied, ceteris paribus.

Direct relationship means that people sell more

of a good if the price is higher and less if the
price is lower.
The law of supply is not as rigid as the law of
demand. The price and the quantity supplied
are not always directly related. Higher prices
could cause an increase or a decrease in the
quantity supplied.

Ceteris paribus means other things remain

unchanged.
Law of supply applies exclusively to the
relationship between supply price and quantity
supplied.
All other things that can affect supply must
remain constant to avoid distorting this
relationship.
Because supply is affected by many factors other
than price, the price/quantity supply relationship
can get lost when other things change.
Other factors that affect supply are called supply
determinants.

The answer rests with production cost. In

particular, the law of supply exists
because of the law of increasing
opportunity cost.
As we saw with production possibilities
analysis, by increasing the production of a
good, the opportunity cost of production
increases.
Production cost increases as we increase
production. To supply a larger quantity,
producers need to cover these higher
production costs with a higher price.

The law of supply, which is an economic

principle stating that supply price and
quantity supplied are directly related, ceteris
paribus.
The fact that the law of supply is not as rigid
as the law of demand.
The ceteris paribus assumption, holding
other things unchanged, that is used when
using the law of supply.
The law of supply is based on increasing
production cost, which depends on the law
of increasing opportunity cost.

A supply schedule
presents the
relationship
between supply
price and quantity
supplied.
Our relationship is
between the supply
price in the middle
column and the
quantity of stuffed
animals supplied in
the right-hand
column.

Ceteris paribus factors do not change.

Quantities are supplied for a specific time
period, such as one year.

First, higher prices go with larger

quantities supplied-the law of supply.
Second, the prices are minimum values
for the given quantities.
Third, supply is the whole set of
price/quantity pair numbers. Quantity
supplied is any single number at the
specified price.
Fourth, these numbers are hypothetical,
presenting a 'what if' relationship.

A supply schedule can be use to plot a

supply curve.
The connected plotted points are called a
supply curve.
A supply curve has a positive slope.
Higher prices correspond with larger
quantities.
The supply curve embodies the law of
supply.

The area above the

supply curve is the
supply space.
The curve represents
the minimum price
that sellers would be
willing to accept.
Sellers would be
willing to accept
more than the supply
price on the supply
curve, but not less.

Ceteris paribus is the notion that other

things remain constant. We make this
assumption because things other than price
affect supply.
These other, ceteris paribus factors, give us
useful analytical tools for examining supply and
the market.
We can turn these factors off and on to better
understand how the market works.
The ceteris paribus factors are called
determinants of supply.

The supply schedule as a table of

price/quantity numbers that illustrate the
supply relation and the law of supply.
The supply curve is derived from the
supply schedule.
The positive slope of the supply curve
reflects the law of supply.
The supply curve, and the supply price,
as the lower limit of supply space.

Supply determinants
shift the supply curve.

The supply curve is

drawn assuming that
only price and quantity
change. The
determinants are
assumed to be constant.
A change in one of the
determinants can cause:
An increase in supply, a
rightward shift, which
means that for any
price, for every price,
sellers are willing and
able to sell more of the
good.

Supply determinants
shift the supply curve.

The supply curve is

drawn assuming that
only price and quantity
change. The
determinants are
assumed to be constant.
A change in one of the
determinants can cause:
A decrease in supply, a
leftward shift, which
means that for any
price, for every price,
sellers are willing and
able to sell less of the
good.

The five determinants that cause the supply

curve to shift are:

Resource prices: If the price of any resource (labor,

capital, land, or entrepreneurship) changes, so too
does production cost and the ability to supply a good.
Technology: Improving production techniques
enhance the ability to supply a good.
Prices of other goods: Goods using the same inputs
can be either substitutes or complements in
production.
Expectations: Sellers' current supply depends on
expectations of future prices.
Number of sellers: More sellers, more supply. Fewer
sellers, less supply.

Supply, the whole range of prices and

quantities
Quantity supplied, a specific quantity
supplied at a specific price.

Change in supply, we are changing, moving,

shifting, the entire supply curve, the whole
set of prices and quantities is changing. The
five determinants change the supply.
Change in quantity supplied, we have moved
to a new quantity on an same supply curve.
Only the price of the good changes the
quantity supplied.
This difference lets us analyze cause and
effect.
Don't confuse these two.

Ceteris paribus assumption makes further

analysis of supply and markets possible.
Changes in the supply determinants cause
rightward or leftward shifts in the supply curve.
The five basic supply determinants: resource
prices, technology, prices of other goods, sellers'
expectations, and number of sellers, each shifts
the supply curve.
Change in the price of a substitute-in-production
affects supply differently than a change in the
price of a complement-in-production.
The difference between a change in supply,
caused by a change in a supply determinant, and
a change in quantity supplied, caused by a
change in price.

Supply is directly connected to the scarcity

problem, especially limited resources.
Scarcity exists because society has limited
resources, but unlimited wants and needs.
Markets were developed as a means of
addressing the problem of scarcity:
The supply side of the market comes from the
'limited resources' side of the scarcity problem.
The demand side of the market comes from the
'unlimited wants and needs' side of the scarcity
problem