2.

4 Supply

Learning Objectives:

• Define supply.
• Explain how individual supply is totalled to give market supply.
• Draw a supply curve and explain movements along a supply curve.
• Analyse the causes of shifts in supply curves and draw diagrams to show the shifts.

1. Starter (5 minutes)
• Imagine that you set up a business selling cupcakes at St. George’s.
• What are the possible factors to consider deciding the quantity supplied? Write down two possible factors.
1) 2)
• How many cupcakes would you be willing and able to supply at the following prices? Fill out the table below.
• Find out three other classmates’ supply schedules and fill out the rest of the table below.

[ SUPPLY SCHEDULE FOR CUPCAKES ]

Quantity supplied per week (units)
Price (€ per unit) INDIVIDUAL SUPPLY
MARKET SUPPLY
Me Classmate A Classmate B Classmate C
€1
€1.5
€2
€2.5
€3

*Key terms (p.41-42 of textbook)

 Supply – the ( ) of a good or service that producers are ( ) and ( ) to supply at a (

) in a ( ).
 Supply schedule – a table that gives the ( ) supplied at a range of ( ).
 Law of supply – as the ( ) of a good or service falls, the ( ) supplied ( ), and vice
versa, ceteris peribus.
 Supply curve – a diagram showing the ( ) of a product ( ) at a range of ( ).

2. Drawing a supply curve (5 minutes)

 Construct a supply curve diagram to show the supply schedule on the world supply of coffee beans (p. 43)
a. Write a title <Figure 1. Supply of coffee beans>
b. Label x-axis ‘Quantity of coffee beans (kg)’ and y-axis ‘Price ($)’
*Key terms (p.42 of textbook)

 Extension in supply – an ( ) in the ( ) supplied in response to an ( ) in ( ).

 Contraction in supply – a ( ) in the ( ) supplied in response to a ( ) in ( ).

3. A movement along a supply curve (Extenstion/Contraction in supply) (5 minutes)

1) On the supply curve, show an “extension in supply.” 2) On the supply curve, show a “contraction in supply.”
 2) If the price of oil falls, what happens to the quantity supplied of oil? Illustrate it on the diagram below.

4. Shits of the supply curve (increase/decrease in supply)

*Key terms (p.43 of textbook)

 Conditions of supply – factors other than the ( ) of the good/service that lead to a change in (
) of the supply curve.
 Increase in supply – a ( ) shift in the supply curve showing that a greater ( ) is
supplied at each price than was previously.
 Decrease in supply – a ( ) shift in the supply curve showing that a smaller ( ) is
supplied at each price than was previously.

1) On the supply curve, show an “increase in supply.” 2) On the supply curve, show a “decrease in supply.”

*Key concepts:

o A change in ( ) will result in an ( ) or ( ) in supply.

 Movement along the curve.

o However, a change in any of the ( ) factors that affect supply will ( ) the
whole ( ).

 Non-price factors that affect supply, shifting the supply curve to the left (decrease) or right (increase).
1) Change in the ( ) of ( )
2) Improvement in ( )
3) Imposition of an ( ) or ( )
 4) ( ) conditions
5) Changes in the price of related goods: ( ) supply and ( ) supply.
6) A change in the number of ( ) to the market
7) Disasters and ( )
8) ( ) and ( ) of commodities

 What is the non-price factor described in the cases below? Match the numbers from above 8 factors. (5m)
a) The German government decided to subsidise firms that try to save energy. ( )
b) There has been an increase in minimum wage. ( )
c) The weather has been particularly favorable for wine production this year. ( )
d) Canada discovered new oilfields. ( )
e) A farmer keeps cattle and sheep, and there has been a rise in the price and profitability of lamb. ( )
f) A more advanced machine has been invented to manufacture automobiles. ( )
g) There has been a large immigrant coming into Germany. ( )
h) The earthquake and resulting tsunami that hit Japan in March 2011 caused extensive damage to
infrastructure and killed workers. ( )

 For each of the changes listed in the table put a tick in the box to show whether the change will lead to a
contraction or an extension in supply (a movement along the supply curve) or an increase or a decrease in
supply (a movement of the whole curve). You should only tick one of the four options. (5 minutes)

Change Extenstion Contraction Increase Decrease in

in supply in supply in supply supply
1) Price of tea increases
2)Wages of tea pickers increase
3)More efficient machinery developed to process tea leaves
4)Very hot weather causes a poor harvest
5)Government increases a subsidy on tea
6)An increase in the number of growers harvesting tea

 Illustrate the above changes on digrams. (5 minutes)

1) 2) 3)

4) 5) 6)
 In pairs, decide whether the following would cause a decrease in the demand, an increase in the demand, a
decrease in the supply or an increase in the supply of gold bracelets: (5 minutes)
a) a decrease in incomes
b) a decrease in the cost of the equipment used to mine gold
c) an increase in the price of silver bracelets
d) an increase in the tax on gold
e) the discovery of new deposits of gold
f) a strike by gold mining workers