ECON 100 1st Edition Lecture 5Outline of Last Lecture I. Economic CoordinationA. Central Economic PlanningB. Decentralized Economic Planning1. Firms2. Markets3. Property Rights4. MoneyII. Markets and PricesA. Competitive Market III. DemandA. Law of DemandB. Quantity Demanded C. Demand Curve1. Willingness-and-ability-to-pay curveD. Change in DemandOutline of Current Lecture I. SupplyA. The Law of SupplyB. Quantity SuppliedC. Supply CurveD. Factors that change supplyII. Change in Supply vs. Change in Quantity Supplied Current Lecture- Supply- If a firm supplies a good or service, the firm…1. Has the resources and the technology to produce it2. Can profit from producing it3. Has made a definite plan to produce and sell it- Resources and technology determine what it is possible to produce Supply reflects a decision about which technologically feasible items to produceThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Quantity supplied is the amount producers plan to sell (given time, given price)- The Law of Supply “Other things remain the same, the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller the quantity supplied.” The law of supply results from the general tendency for the marginal cost of producing a good to increase as the quantity produced increases Producers are willing to sell a good only if they can at least cover their marginal cost of production - Supply Curve  Supply – entire relationship between the quantity supplied and the price of a good Supply curve – relationship between the quantity supplied and the goods price Also called a ‘minimum-supply-price” curve a. Lowest price at which someone is willing to sell (marginal cost)b. Quantity produced increases, marginal cost increases- Change in Supply Supply increases, curve shifts to the right; supple decreases, curve shifts to the left- 6 Factors change supply1. Prices of factors of production a. Increases in price of FoP, decrease in supply2. Prices of related goods produced a. Substitute – another good that can be produced using the same resources (decrease price of substitute, increase supply of good)b. Compliment – goods that must be produced together (increase price of compliment, increase supply of good)3. Expected future pricesa. Price of good is expected to rise in the future, supply of the good today decreases4. Number of Suppliers a. The larger the number of suppliers of a good the greater the supply of a good5. Technology a. Advances create new products and lower costs of producing goods  increase supply6. The state of nature a. Includes all natural forces that influence productionb. Natural disaster decreases supply- Change in Supply vs. Change in Quantity