ASSIGNMENT

Module III: Producer’s Behavior and Supply

1. Explain the law of supply?

The law of supply is the microeconomic law that states that, all other factors being equal,
as the price of a good or service increases, the quantity of goods or services that
suppliers offer will increase, and vice versa. The law of supply says that as the price of an
item goes up, suppliers will attempt to maximize their profits by increasing the quantity
offered for sale.

2. Explain the difference between Supply and Quantity Supplied?

“Supply” is the designated name for the amount of products or services that are to be
provided by a certain company to a market. The supply is illustrated in a supply curve and
in a graph for simplification and illustration of the relationship between prices and
quantities more clearly. It includes all the possible prices and possible quantities that are
available.

Meanwhile, “quantity supplied” is the name for a specific point in the supply curve.
“Quantity supplied” illustrates the amount or quantity that is willing to be provided for a
certain market price. “Quantity supplied” is usually how many in number depending on
the prices and quantity being illustrated for a specific time period or condition.

Both “supply” and “quantity supplied” can be translated into a graph. “Supply” can be
graphed as the entire supply curve with all the possible prices and quantity and their
intersections. “Quantity supplied” can be seen in the supply curve. It is one specific point
or intersection between a certain price and quantity.

When the supply increases, the supply curve shifts to the right. If this happens, the
amount of the quantity increases as well as the possible market price. There are many
factors that affect the supply. If the supply deceases, the shift is to the left as an indicator.
3. Explain how does supply curve works?

The supply curve will move upward from left to right, which expresses the law of
supply: As the price of a given commodity increases, the quantity supplied
increases (all else being equal).

This formulation implies that price is the independent variable, and quantity the
dependent variable. In most disciplines, the independent variable appears on the
horizontal or x-axis, but economics is an exception to this rule.
 4, Discuss the reasons that causes shift in supply curve and how?

If a factor besides price or quantity changes, a new supply curve

needs to be drawn. For example, say that some new soybean farmers
enter the market, clearing forests and increasing the amount of land
devoted to soybean cultivation. In this scenario, more soybeans will
be produced even if the price remains the same, meaning that the
supply curve itself shifts to the right (S2) in the graph below. In other
words, supply will increase.

Other factors can shift the supply curve as well, such as a change in
the price of production. If a drought causes water prices to spike, the
curve will shift to the left (S3). If the price of a substitute—from the
supplier's perspective—such as corn increases, farmers will shift to
growing that instead, and the supply of soybeans will decrease (S3).

If a new technology, such as a pest-resistant seed, increases yields,

the supply curve will shift right (S2). If the future price of soybeans is
higher than the current price, the supply will temporarily shift to the left

5, Identify how each factor will shift the supply curve: right, left, or move along.

Market Change

1. Computers Price of memory chips decreases.

2. Airline Tickets Government imposes a new jet fuel tax.

3. Milk Demand for milk increases.

4. Homes Potential sellers expect home prices to decline in six months.

5. Cars A new engine design reduces the cost of producing cars.

6. Corn The price of wheat (a substitute in production increases in price).

7. Oranges A freeze in Florida kills 25% of the orange crop.

. 1. S-Right

2. S-Left

3. Along-Greater Q

4. S-Right

5. S-Right

6. S-Left

7. S-Left