ECON 100 1st Edition Lecture 5 Outline of Last Lecture I Economic Coordination A Central Economic Planning B Decentralized Economic Planning 1 Firms 2 Markets 3 Property Rights 4 Money II Markets and Prices A Competitive Market III Demand A Law of Demand B Quantity Demanded C Demand Curve 1 Willingness and ability to pay curve D Change in Demand Outline of Current Lecture I Supply A The Law of Supply B Quantity Supplied C Supply Curve D Factors that change supply II 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 it 2 Can profit from producing it 3 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 produce These 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 supply 1 Prices of factors of production a Increases in price of FoP decrease in supply 2 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 prices a Price of good is expected to rise in the future supply of the good today decreases 4 Number of Suppliers a The larger the number of suppliers of a good the greater the supply of a good 5 Technology a Advances create new products and lower costs of producing goods increase supply 6 The state of nature a Includes all natural forces that influence production b Natural disaster decreases supply Change in Supply vs Change in Quantity Supplied