What Is Supply

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Main Idea

For almost any good or service, the higher the price, the larger the quantity that will be offered for sale.

Reading Strategy

Graphic Organizer As you read the section, complete a graphic organizer similar to the one below by describing how supply differs from demand.

Supply

Demand

Differences

Key Terms supply, Law of Supply, supply schedule, supply curve, market supply curve, quantity supplied, change in quantity supplied, change in supply, subsidy, supply elasticity

Objectives

After studying this section, you will be able to:

1. Understand the difference between the supply schedule and the supply curve.

2. Explain how market supply curves are derived.

3. Specify the reasons for a change in supply.

Applying Economic Concepts

Supply The Law of Supply tells us that firms will produce and offer for sale more of their product at a high price than at a low price. On another level, think about your own labor. You are the supplier, and the higher the pay, the more work you are willing to supply.

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The concept of supply is based on voluntary decisions made by producers, whether they are proprietorships working out of home offices or large corporations operating out of downtown corporate headquarters. For example, a producer might decide to offer one amount for sale at one price and a different quantity at another price. Supply, then, is defined as the amount of a product that would be offered for sale at all possible prices that could prevail in the market.

Because the producer is receiving payment for his or her products, it should come as no surprise that more will be offered at higher prices. This forms the basis for the Law of Supply, the principle that suppliers will normally offer more for sale at high prices and less at lower prices.

An Introduction to Supply

All suppliers of economic products must I' decide how much to offer for sale at various prices-a decision made according to what is best for the individual seller. What is best depends, in

ECONOMICS ■

Figure 5.1

AT A GLANCE

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