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Law of Supply

Explore the Law of Supply and its relationship with Demand. Learn about the fundamental principles that govern the supply of goods and services, specifically how the quantity supplied increases as prices rise and the profit incentive that motivates business owners. This guide contrasts the upward slope of the supply curve with the downward slope of the demand curve, illustrating their fundamental differences. Additionally, discover factors that can shift supply and the implications for businesses aiming to maximize profit and customer satisfaction.

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Law of Supply

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Presentation Transcript

  1. Law of Supply How is Supply similar yet different from Demand?

  2. Think– what would you want to happen if you owned a business? • You are motivated by profit (profit incentive) • You want customers to be happy (continue to shop) • You want to stay in business as long as possible • You want your employees (if large enough to hire) happy • You want to make as much money as possible 

  3. As the Price for a good or service goes upSo too does the Quantity Supplied Makes sense doesn’t it?

  4. If you would sell a good or service for $5,Why wouldn’t you want to sell more of the same good or service for $10? $10 ea OR ??? $5ea

  5. Sure it makes sense because the more money I can sell something for, the more profit I will make (assuming the costs stay the same– Ceteris Paribus) • Profit = Price - Cost

  6. On the opposing side, the law of Demand is just the opposite: As the price goes up the quantity demanded goes down Makes sense too? Right?

  7. Sure that makes sense too, a penny saved is a penny earned. Why pay more than is absolutely necessary? • Money not spent is money in my pocket or bank!

  8. How does the Law of supply look on a graph? As the Price goes up the Quantity supplied goes up too

  9. Wow that graph is similar but different from all of the Demand curves we have drawn! • Yes, They’re like mirror opposites. • One goes upper left to • lower right • And the other goes lower • left to upper right. • Which is which?

  10. What can change Supply then???? • I sense a new foldable coming on….. Oh brother  • Chapter 5.5 Supply Shifters p 85-87 • More Economic Origami

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