A. Supply is the amount of a product that would be

offered for sale at all possible prices in the market. B. The Law of Supply states that suppliers will normally offer more for sale at high prices and less at lower prices.

2. As the price rises for a good, the quantity supplied also rises

3. As the price falls, the quantity supplied also falls

P = Q

P = Q

E. Economists analyze supply by listing quantities and prices in a supply schedule (table). When the supply data is graphed, it forms a supply curve with an upward slope.

When the supply data is graphed, it forms a supply curve with an upward slope.

B. Producers have freedom…

A. A change in quantity supplied is the change in the amount offered for sale in response to a change in price

If prices fall too low, producers may slow or stop production or leave the market completely. If the price rises, the producer can step up production levels

A. A change in supply is when suppliers offer

different amounts of products for sale at all possible prices in the market

Price of inputs (labor, packaging costs for example)Productivity levels Technology

Taxes or the level of subsidiesPrice expectationsGovernment regulations

Number of sellers

A. Supply is elastic when a small increase in price leads to a larger increase in output—and supply. A. Supply is elastic when a small increase in price leads to a larger increase in output—and supply.

B. Supply is inelastic when a small inelastic when a small increaseincrease in price causes little change in in price causes little change in supplysupply

D. Determinants of supply elasticity are related to how quickly a producer can act when the change in price occurs.

D. Determinants of supply elasticity are related to how quickly a producer can act when the change in price occurs.

2. If production is complex and requires much

advance planning, the supply is inelastic

2. If production is complex and requires much

advance planning, the supply is inelastic

A. The number of substitutes has no bearing on

elasticity of supply

A. The number of substitutes has no bearing on

elasticity of supply B. The ability to delay the purchase or the portion of income consumers have no relevance to supply elasticity

A. The short run refers to a period of production that allows producers to only change the variable labor.

A. The short run refers to a period of production that allows producers to only change the variable labor.

B. The long run refers to a period of production that

allows producers to adjust quantities of all their resources, including capital.

B. The long run refers to a period of production that

allows producers to adjust quantities of all their resources, including capital. * adding a factory = long run adjustment

* hiring more workers = short run

Salt added to food = tasty in the right amount BUT at some point it will ruin the taste... taste = output

C. Economists prefer that only a single variable be

changed at any one time so the impact of this

variable on total output can be measured.

C. Total product= the total output the company produces

a production schedule shows that, as more workers are added, total product rises until a point that adding more workers causes a decline in total product.

Companies are tempted to hire moreCompanies are tempted to hire more workers, which moves them to Stage IIworkers, which moves them to Stage II.

Each worker is still making a positive contribution to total output, but it is diminishing.

Workers 11 & 12 would most likely not be hired

These include management salaries, rent, taxes, and depreciation on capital goods.

B. Variable costs are those that change when the rate of operation or production changesThese include hourly labor, raw materials, freight charges, and electricity

These include hourly labor, raw materials, freight charges, and electricity

C. Total cost = the sum of all fixed costs and all variable costs

C. Total cost = the sum of all fixed costs and all variable costs

D. Marginal cost = the extra (variable) costs incurred when a business produces one

additional unit of a product.

D. Marginal cost = the extra (variable) costs incurred when a business produces one

additional unit of a product.

A. A self-service gas station is an example of high fixed costs with low variable costs.

A. A self-service gas station is an example of high fixed costs with low variable costs.

B. E-commerce is an example of an industry with low fixed costsB. E-commerce is an example of an industry with low fixed costs

The ratio of variable to fixed costs is lowThe ratio of variable to fixed costs is low

A. Total revenue = the number of units sold

X the average price per unit.

A. Total revenue = the number of units sold

X the average price per unit. B. Marginal revenue is the extra revenue connected with producing and selling an additional unit of output.

B. Marginal revenue is the extra revenue connected with producing and selling an additional unit of output.

B. The break-even point is the total output or total product that business needs to sell in order to cover its total costs.

B. The break-even point is the total output or total product that business needs to sell in order to cover its total costs.

C.Businesses want to find the number of workers and the level of output that generates maximum profits

The profit-maximizing quantity of output is reached when marginal cost and marginal revenue are equal.