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You have 10 minutes to finish up your project… Make sure numbers 1-6 are completed

You have 10 minutes to finish up your project… Make sure numbers 1-6 are completed. Chapter 5: Supply. The Law of Supply. Supply refers to the amount of goods available The law of supply is the tendency of suppliers to offer more of a good at a higher price

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You have 10 minutes to finish up your project… Make sure numbers 1-6 are completed

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  1. You have 10 minutes to finish up your project… Make sure numbers 1-6 are completed

  2. Chapter 5: Supply

  3. The Law of Supply • Supply refers to the amount of goods available • The law of supply is the tendency of suppliers to offer more of a good at a higher price • The more profit a supplier makes off a particular good, the more incentive a supplier has to sell that good • Conversely, the less money a supplier makes off a particular good, the less incentive a supplier has to sell that good

  4. Example of the Law of Supply • To understood the law of supply, you must think like a businessman. Your priority is to make as much profit as possible. • Therefore, if you are selling a BMW for a profit of 10k, and you are selling an Acura for a profit of 7k, you have more incentive to make and sell more BMW’s than Acura’s. • If you sell 10 BMW’s you will net $100k in profit • If you sell 10 Acura’s you will net 70k in profit

  5. Supply Curve • Represents the law of supply. • As price increases, so does quantity produced.

  6. Elasticity of Supply • A measure of the way the quantity of supply reacts to a change in price • Elasticity of supply often depends on time. Take an orange grove for example. Orange trees take several years to mature and grow. Thus, if the price of oranges goes up, the trees will take several years to bear fruit. • Therefore, in the short term supply is inelastic. In the long term, supply is elastic. • A small price increase has a big effect on supply in order to maximize profit • For Example: If I sell 10,000 oranges a month and I can increase the price of oranges by $0.50 without lowering my number sold, then my profit increases $5000 per month.

  7. Critical Thinking: Law of Supply & Elasticity of Supply • If the price of Toyota Camry’s increase, what effect will that have on supply? • The Toyota factory produces 100 Toyota Camry’s a month. However, sales have declined and therefore Toyota decides to cut its Camry production in half and build more Corrolla’s instead. However, it will take 3 months to shift production. This is an example of what?

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