Economics Chapter 4 Section: 1 1. Vocabulary • Supply- quantity of goods and services that producers are willing to offer at various possible prices during a given time period. • Quantity supplied- the amount of a good or service that a producer is willing to sell at each particular price. • Law of supply- states that producers supply more goods and services when they can sell them at higher prices and fewer goods and services when they must sell them at lower prices. • Profit- The amount of money remaining after producers have paid all of their costs. • Costs of production- the total cost of materials, labor, and other inputs required in the manufacture of a product. • Supply schedule-too that shows the relationship between the price of a good or service and the quantity that producer will supply. • Supply curve- plots on a graph the inf9ormation from a supply schedule. • Elasticity of supply- the degree to which price changes affect the quantity supplied. • Elastic supply- exists when a small change in price causes a major change in the quantity supplied. • Inelastic supply- exists when a change in a good’s price has little impact on the quantity supplied. 2. Q : How does the concept of supply differ from the quantity supplied? A : Supply is different than quantity supplied because the producer gives various amounts of an item produced to a buyer for various prices. These items are also sold during a specific time period or season such as winter, summer, or spring. Quantity supplied is the set amount of clothing supplied at a particular set price for each quantity. 3. Q: What is the law of supply? How does the profit motive help explain the law of supply? A: The law of supply states that producers will sell more goods and services when they can sell them at higher prices; producers will sell fewer goods and services when they sell them for less. The profit motive proves the theory of the law of supply because the more a consumer wants something the more of that product they will buy. This causes the prices to be raised for that particular item because it is desired and will sell. When there is an item that is not selling well the prices will be low and production will decrease. This happens because producers
want to make a profit and if they make a great amount of an item people do not desire they will lose money. 4. Q: What is the difference between a supply schedule and a supply curve? A: Supply schedules are lists of each quantity of a certain product and for each quantity there is a specified price. An example would be a company selling two quantities of a product such as televisions. The supply schedule that was given to the buyer tells them that they can either get 3,000 televisions for three hundred dollars, or 2,450 televisions for two hundred and fifty dollars. A supply graph is different because instead of listing it plots information from the supply schedule onto a graph. The graph will show the possible combinations of prices and
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