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Unformatted text preview: ingness and ability to produce and sell. Willingness to produce and sell means that the person wants or
desires to produce and sell the good. Ability to
produce and sell means that the person is
capable of producing and selling the good.
E X A M P L E : Jackie is willing to build
and sell wooden chairs, but unfortunately
she doesn’t know how to build a chair. In
other words, she has the willingness but not
the ability. Outcome: Jackie will not supply
chairs. What Does the Law
of Supply Say?
Suppose you are a supplier, or producer, of
TV sets, and the price of a set rises from $300
to $400. Would you want to supply more or fewer TV sets at the higher price? Most people would say more. If you did, you instinctively understand the law of supply, which
says 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. In other
words, price and quantity supplied move in
the same direction. This direct relationship
can be shown in symbols:
Law of Supply
If P ↑ then Qs ↑
If P↓ then Qs↓
(where P price and Qs quantity supplied) When economists use the word supply,
they mean something different from what
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This document was uploaded on 01/16/2014.
- Winter '14