Date Period BEFORE YOU BEGIN. Looking at the Chapter. MARKETS (Chapter 5)

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1 Date Period SUPPLY BEFORE YOU BEGIN Looking at the Fill in the blank spaces with the missing words. DEMAND ( 3) MARKETS ( 5) SUPPLY ( ) _ and supplied move in the direction Law of Supply Supply curve: picturing the law of supply Shifters: resource,, taxes,,, number of sellers Factors that shift a Supply Curve Change in supply versus change in supplied,, unit-elastic supply Elasticity of Supply Study Guide 36 NTC/Contemporary Publishing Group, Inc.

2 Date Period Outlining the I. Supply A. Markets are where people come together to buy and sell goods or services. 1. is the buying side of a market. 2. is the selling side of a market. B. Supply refers to the willingness and ability of sellers to produce and offer to sell a good or service. C. The holds that as the price of a good increases, the quantity supplied of the good increases; and as the price of a good decreases, the quantity supplied of the good decreases. 1. Price and quantity supplied move in the same direction, or have a. D. The difference between supply and quantity supplied 1. refers to the number of units of a good produced and offered for sale at a specific price. Supply refers to the willingness and ability of sellers to produce and sell a good or service. E. A supply represents the law of supply in numbers. F. A supply shows the law of supply in graphical form. It plots the numbers in a supply schedule. II. Factors That Can Cause the Supply Curve to Shift A. Supply curve shifts 1. A rightward shift in the supply curve means that supply has. 2. A leftward shift in a supply curve means that supply has. B. What factors cause supply curves to shift? 1. Resource prices a. An increase in a resource price decreases (shifts _) supply. b. An decrease in a resource price increases (shifts _) supply. 2. Technology a. Improved technology increases (shifts right) supply. 3. decrease (shift left) supply. Study Guide 37 NTC/Contemporary Publishing Group, Inc.

3 Date Period. increase (shift right) supply. 5. Quotas (shift left) supply. 6. Number of sellers a. An increase in the number of sellers increases (shifts right) supply. b. A decrease in the number of sellers decreases (shifts left) supply. 7. Weather (in some cases) a. In agricultural products, for example, poor weather may decrease (shift left) supply. C. A change in supply versus a change in quantity supplied 1. A change in supply refers to a in the supply curve. a. A change in the prices of relevant resources, technology, a tax, a subsidy, quota, the number of sellers, or weather (in some cases) can cause a change in supply. 2. A change in supplied refers to a movement along a supply curve a. Only a change in _ of the good can directly cause a change in quantity supplied of a good. D. Elasticity of supply 1. Elasticity of supply measures the relationship between the percentage change in quantity supplied and the percentage change in. 2. Elasticity of supply can be written as a ratio: Elasticity of supply = Percentage change in quantity supplied Percentage change in price a. supply means that quantity supplied (the numerator) changes by a greater percentage than the percentage of price (the denominator). b. supply means that quantity supplied (the numerator) changes by a smaller percentage than price (the denominator). c. _ supply means that quantity supplied (the numerator) changes by the same percentage as price (the denominator). E. A seller has the responsibility to inform the buyer about the condition or quality of the good. Study Guide 38 NTC/Contemporary Publishing Group, Inc.

4 Date Period Building Vocabulary Match the economic terms in the list with the descriptions below. Write the correct letter on the lines provided. a. supply b. elastic supply c. elasticity of supply d. inelastic supply e. law of supply f. per-unit cost g. quantity supplied h. quota i. supply curve j. direct relationship k. supply schedule l. technology m. unit-elastic supply 1. A legal limit on the number of units of a foreign-produced good (or import) that can enter a country 2. The relationship between the percentage change in quantity supplied and the percentage change in price 3. The willingness and ability of sellers to produce and offer to sell a good or service. States that as the price of a good increases, the quantity supplied of the good increases, and as the price of a good decreases, the quantity supplied of the good decreases 5. When the percentage change in quantity supplied is greater than the percentage change in price 6. A relationship between two factors in which the factors move in the same direction 7. When the percentage change in quantity supplied is less than the percentage change in price 8. A numerical chart that illustrates the law of supply 9. The average cost of a good 10. The number of units of a good offered for sale at a specific price Study Guide 39 NTC/Contemporary Publishing Group, Inc.

5 Date Period AS YOU STUDY Illustrating Economic Skills The exhibit below shows a supply curve for compact discs. Each of the following situations causes a shift in the supply curve. For each situation, show how the supply curve shifts by drawing in the new supply curve. Label each supply curve with the appropriate number. The first one is completed for you. Price S S1 $20 Q Q1 Quantity of CDs 1. An advancement of technology allows more compact discs to be produced with a fixed amount of resources. 2. A tax is imposed on each compact disc produced and sold. 3. The price of the plastic used to make compact discs increases.. New firms enter the compact disc industry and start to sell compact discs over the Internet. Study Guide 0 NTC/Contemporary Publishing Group, Inc.

6 Date Period Using Economic Concepts Taxes and subsidies change (or shift) the supply curve because they change the per-unit costs of producing a good. Think about what would happen to the supply of popcorn at movies theaters if popcorn were either taxed or subsidized. The table below gives you three supply schedules. Schedule A lists the quantities supplied without a tax or subsidy. Schedule B shows the quantities supplied if popcorn were taxed. Schedule C gives you the quantities supplied if popcorn were subsidized. For each supply schedule draw the correct supply curve in the graph provided on the next page. Make sure your quantities are labeled correctly. Supply Supply Supply Schedule Schedule Schedule A B C Price Original Quantity Quantity Quantity Supplied Supplied Supplied after after (units) Tax Subsidy $ $ $ $ Study Guide 1 NTC/Contemporary Publishing Group, Inc.

7 Date Period Price $50 $0 $30 $20 $ Quantity of Popcorn Supplied Study Guide 2 NTC/Contemporary Publishing Group, Inc.

8 Date Period AS YOU REVIEW Practicing for the Test Multiple Choice: Choose the best answer for each question or description and write the corresponding letter in the space provided. 1. Which of the following changes will cause the supply curve to decrease (shift left)? a. resource prices fall b. technology advances c. a subsidy is imposed on the production of a good d. a tax is placed on the production of a good 2. The law of supply can be represented graphically in a. a. quantity supplied b. inelastic supply c. supply curve d. supply schedule 3. According to the law of supply, as price rises, rises. a. quantity supplied b. demand c. price of resources d. none of the above. The percentage change in the quantity supplied of baseball games equals the percentage change in the price of baseball tickets. If this is true, then the supply of baseball games is. a. elastic b. inelastic c. unit-elastic d. none of the above 5. Which of the following will increase the supply curve for outdoor concerts? a. The price of renting outdoor stadiums for concerts decreases. b. Many cities restrict the number of concerts allowed each year. c. A tax is placed on outdoor concert events. d. Unusually bad weather occurs. Study Guide 3 NTC/Contemporary Publishing Group, Inc.

9 Date Period 6. If the price of this textbook rises 10 percent and the quantity supplied of the books rises 1 percent, then the supply for the textbook is. a. elastic b. inelastic c. unit-elastic d. none of the above 7. It costs you 20 dollars in gas to go to and from school per week (five round trips). What is the weekly average cost (per day) for gas of driving back and forth to school? a. 10 dollars b. 20 dollars c. dollars d. 5 dollars 8. A legal limit on the number of units of a foreign-produced good (or import) that can enter a country is called a. a. subsidy b. elastic c. tariff d. quota 9. If the price of hot dogs sold during the 2001 World Series increases by 15 percent, and the number sold increases by 25 percent, the supply of hot dogs is. a. inelastic b. elastic c. unit-elastic d. none of the above 10. will increase (shift right) the supply curve for a good. a. An increase in the price of a resource b. An advancement in technology c. An increase in a tax on the good d. A decrease in the number of sellers Study Guide NTC/Contemporary Publishing Group, Inc.