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Chapter 4

Chapter 4 Suppy and Equilibrium.docx

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McMaster University
Krishnakali Sen Gupta

CHAPTER 4 Supply  The quantity supplied of any good is the amount that sellers are willing and able to sell.  Law of supply: the claim that the quantity supplied of a good rises when the price of the good rises, other things equal Supply schedule: A table that shows the relationship between the price of a good and the quantity supplied.  Example: Starbucks’ supply of lattes.  Notice that Starbucks’ supply schedule obeys the Law of Supply. Price Quantity of lattes of lattes supplied $0.00 0 1.00 3 2.00 6 3.00 9 4.00 12 5.00 15 6.00 18 Market Supply versus Individual Supply  The quantity supplied in the market is the sum of the quantities supplied by all sellers at each price. s  Suppose Starbucks and Jitters are the only two sellers in this market. (Q = quantity supplied) Supply Curve Shifters:  The supply curve shows how price affects quantity supplied, other things being equal.  These “other things” are non-price determinants of supply.  Changes in them shift the S curve… Supply Curve Shifters: Input Prices  Examples of input prices: wages, prices of raw materials.  A fall in input prices makes production more profitable at each output price, so firms supply a larger quantity at each price, and the S curve shifts to the right. Technology:  Technology determines how much
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