ECO 025: Basic Microeconomics

Module #8 Student Activity Sheet

Name:Ma. Louisa Taypin Class number: _________________

Section: _________ Schedule: ______________________ Date: _________________________

Lesson Title: Application of Law of Supply and Predicting Materials:

the Shift of the Supply Curve Student Activity Sheet

Lesson Objectives: References:

Economics by Bello, Camacho,
At the end of the day, the students can: Catelo, Cuevas and Rodriguez,
1. Define the concept of supply as an economic term; 2009 Edition
2. Illustrate the law of supply in graphical presentation;
3. Enumerate and explain different determinants of Managerial Economics Business
supply/supply shifters; and Strategy ninth edition by
4. Illustrate the shift of the supply curve in graphical Baye,Prince
presentation.

Verse of the Day: Whoever is patient has great understanding, but one who is quick-tempered
displays folly. Proverbs 14:29 NIV

A. LESSON PREVIEW/REVIEW
Introduction
Hi Buddy! Welcome to the topic “The Law of Supply”. This topic is considering the super twin of the
concept of Demand that’s why you often hear the phrase “Demand and Supply”. Before you go on to the
next interesting topic, let’s recall what you have remembered about the previous discussion.

Direction: On the figure below, enumerate at least 4 determinants of demand.

population 2. income
1.

Determinants of
Demand
4.

Number of buyers Price of related goods

3.

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 ECO 025: Basic Microeconomics
Module #8 Student Activity Sheet

Name:Ma. Louisa Taypin Class number: _________________

Section: _________ Schedule: ______________________ Date: _________________________

1) Activity 1: What I Know Chart, part 1

Do you know anything about your surroundings? Try answering the questions below by writing your
ideas under the first column What I Know. It’s okay if you write keywords or phrases that you think are
related to the questions.

What I Know Questions: What I Learned

1 What is the law of supply?

2 What is a market supply?

3 What are the determinants of

supply?

B. MAIN LESSON
1) Activity 2: Content Notes

Supply - refers to the relationship between the price of a particular good and the quantity of the good that
firms are willing to sell at that price, all other things remaining the same.
- Supply in economics refers to such seemingly disparate choices as the number of candy bars a
firm wants to sell and the number of hours a worker is willing to work.

Law of Supply – the higher the price, the higher the amount or quantity of a good that will be supplied by
firms or producers. The lower the price, the lower the quantity that will be brought to the market. Thus, the
price and quantity supplied of a good are positively or directly related.

Sample Supply Curve Sample Supply Schedule

Quantity
Price Supplied
a 5 0
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 ECO 025: Basic Microeconomics
Module #8 Student Activity Sheet

Name:Ma. Louisa Taypin Class number: _________________

Section: _________ Schedule: ______________________ Date: _________________________

b 10 1
c 15 2
d 20 3
e 25 4

Why is Supply Upward Sloping?

1. Simple Reasoning of both because each firm is willing to supply more of the good at a higher
price and because higher prices entice new firms to produce
2. Diminishing Marginal Returns(DMR)
3. Scarcity of Inputs

Another element that is essential to the market economy is supply.

 Supply describes the behavior of firms that are producing and selling goods and services.
 The Law of Supply illustrates that other things remaining the same, quantity supplied of a commodity
is directly related to the price of the commodity. When a price of a commodity increases, its quantity
supplied increases and when the price falls, quantity supplied also falls.

Individual Supply vs. Market Supply

Individual Supply refers to supply of a commodity by an individual firm in the market.

Market Supply refers to supply of a commodity by all the firms in the market. If there are only two firms in
the market and one of them is selling 50 units and the other is selling 70 units at a given price, the market
supply at this given price will be 120 units.

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 ECO 025: Basic Microeconomics
Module #8 Student Activity Sheet

Name:Ma. Louisa Taypin Class number: _________________

Section: _________ Schedule: ______________________ Date: _________________________

Difference between Supply and Quantity Supplied

Supply refers to the entire supply schedule showing various quantities of a commodity offered for sale
corresponding to different possible prices of that commodity, at a given time. On the other hand, quantity
supplied refers to a specific quantity (like 15 units) offered for sale against a specific price.

Change in Quantity Supplied (Movement) Vs Change in Supply (Shift)

 Change in quantity supplied (movement- expansion or contraction):

A movement along the supply curve is caused by changes in the price of the good, other
things remaining constant.
 In a movement, no new supply curve is drawn.
 Movement along the supply curve can be of two types:
 Expansion or extension of supply refers to rise in supply due to rise in price of the good.
 Contraction of supply refers to fall in supply due to fall in the price of good.
 Change in Supply (Shift- Increase or Decrease):
 A shift in supply curve is caused by changes in factors other than the price of the good.
 A change in any of these above factors causes shift in the supply curve. It is also called change
in supply. In a shift, a new supply curve is drawn. The factors the cause shift in the supplied
curve are also called determinants of supply.

Government
Substitutes in
Input prices Production

Determinants of
Supply
Technology Producer
Expectations

Number of Firms

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 ECO 025: Basic Microeconomics
Module #8 Student Activity Sheet

Name:Ma. Louisa Taypin Class number: _________________

Section: _________ Schedule: ______________________ Date: _________________________

1. Technology
Anything that changes the amount of outputs that a firm can produce with a given amount of inputs can
be considered a change in technology. Technology gets better with time because of new ideas and
discoveries. Technological improvements shift the supply curve to the right and increase supply.

2. Input prices
The supply curve reveals how much producers are willing to produce at alternative prices. As
production costs change, the willingness of producers to produce output at a given price changes. In
particular, as the price of an input rises, producers are willing to produce less output at each given
price. This decrease in supply is depicted as a leftward shift in the supply curve.

3. Number of Firms
The number of firms affects the position of the supply curve. As additional firms enter an industry, more
and more output are available at each given price. This is reflected by a rightward shift in the supply
curve.

4. Substitutes in Production
Many firms have technologies that are readily adaptable to several different products. For example,
automakers can convert a truck assembly plant into a car assembly plant by altering its production
facilities. When the price of cars rises, these firms can convert some of their truck assembly lines to car
assembly lines to increase the quantity of cars supplied. This has the effect of shifting the truck supply
curve to the left.

5. Government
An increase in sales tax and other forms of taxes is an added cost to production and will decrease
supply. The imposition of a value added tax on cigarettes raises production costs which may reduce the
supply of cigarettes. Government regulations, which can increase or lower the costs of production, also
affect the supply of outputs of firms.

6. Producer expectations/Expectation of Future Prices

Producer expectations about future prices also affect the position of the supply curve. In effect, selling a
unit of output today and selling a unit of output tomorrow are substitutes in production. If firms suddenly
expect prices to be higher in the future, and the product is not perishable, producers can hold back
output today and sell it later at a higher price. This has the effect of shifting the current supply curve to
the left.

RULE : Supply curve will shift to the RIGHT when supply INCREASES, and shifts to the LEFT as
supply DECREASES.
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 ECO 025: Basic Microeconomics
Module #8 Student Activity Sheet

Name:Ma. Louisa Taypin Class number: _________________

Section: _________ Schedule: ______________________ Date: _________________________

2) Activity 3: Skill-building Activities

Part 1. Direction: Write TRUE if the statement is correct and FALSE if the statement is incorrect.
1. Firms will either enter or exit the industry over time in response to the presence of economic profits or
losses and other factors.
2. Studying supply in economics is a must especially in analyzing the concepts of business and political
laws.
3. The more the price of goods is low, the more producers supply for it.
4. The supply of goods is defined to be the relationship that exists between the price of the good and the
quantity supplied in a given time period, ceteris paribus.
5. According to various managers, understanding the law of supply is not vital.
6. The more firms supply, the more we get satisfied, so producing goods must always be unlimited.
7. In a market economy, the price of a good or service is determined through the interaction of demand
and supply.
8. The relative price of a commodity is a measure of how expensive a good is in terms of units of some
other good or service. Which is not essential in understanding supply?
9. Both the supply schedule and the supply curve indicate that, for this good, an inverse relationship exists
between the price and the quantity demanded when other factors are held constant.
10. Producers would like to sell more units at higher prices and vice versa. Producers would like to receive
higher revenue by selling more at higher prices.

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 ECO 025: Basic Microeconomics
Module #8 Student Activity Sheet

Name:Ma. Louisa Taypin Class number: _________________

Section: _________ Schedule: ______________________ Date: _________________________

Part 2. Direction: Determine whether the supply curve will shift to the left or to the right in relation to different
situations stated below. Write the letter of the correct answer.

B C
1. Production Efficiency of a manufacturing organization.
2. Winning of the most favorite basketball team by most of the sellers of tinapa.
3. Changes in the consumption of fuel and air-conditioning during summer.
4. Increase in the number of hotels and spas in a municipality.
5. The government provides more subsidies to the public.
6. Production of substitute goods: goods that can be produced using the same inputs.
7. The company has tremendous shutdown of operations and additional costs are incurred.
8. Alcatel used modernized methodologies to come up with the most advanced gadgets in the market.
9. Decrease in variable and fixed costs incurred by an organization in the province.
10. The sellers need to take advantage of the penetrated prices in the market, where they will cater the
lowest income level in the economy.

3) Activity 4: What I Know Chart, part 2

It’s time to answer the questions in the What I Know chart in Activity 1. Write your answers in the table.

What I Know Questions: What I Learned

1 What is the law of supply?

2 What is a market supply?

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 ECO 025: Basic Microeconomics
Module #8 Student Activity Sheet

Name:Ma. Louisa Taypin Class number: _________________

Section: _________ Schedule: ______________________ Date: _________________________

3 What are the determinants of

supply?

4) Activity 5: Check for Understanding

Direction: Create your own supply curve using the following supply schedule. (Note: Use an equal
interval)

Supply of Cellphones Price (Php)

(Qty)
500 5,000
800 5,500
1,200 6,000
1,500 6,500
2,000 7,000

C. LESSON WRAP-UP
1) Activity 6: Thinking about Learning

Congratulations for finishing this module! Shade the number of the module that you finished.
My Work Tracker
You are done with the session! Let’s track your progress.

Period 1 Period 2 Period 3

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

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 ECO 025: Basic Microeconomics
Module #8 Student Activity Sheet

Name:Ma. Louisa Taypin Class number: _________________

Section: _________ Schedule: ______________________ Date: _________________________

Did you have challenges learning the concepts in this module? If none, which parts of the module helped you
learned the concepts?
________________________________________________________________________________________

Some question/s I want to ask my teacher about this module

is/are:___________________________________________________________________________________
________________________________________________________________________________________

FAQs
1. What happens when there is a change in supply?

A change in supply leads to a shift in the supply curve, which causes an imbalance in the market that is
corrected by changing prices and demand. An increase in the change in supply shifts the supply curve to the
right, while a decrease in the change in supply shifts the supply curve left.

2. Is “change in supply” the same with “change in quantity supplied”?

No, change in supply is different from change in quantity supplied. Change in supply refers to the shift
in supply curve caused by changes in factors other than price of the good while change in quantity supplied
refers to the movement along the supply curve caused by changes in the price of the good.

KEYS TO CORRECTION
Answer to Activity #3.
Part 1: 1. T, 2. F, 3. F, 4.T, 5.T, 6.F, 7.T, 8.F, 9.F, 10. T
Part 2: 1.A, 2.C, 3.A, 4.A, 5.A, 6.B, 7.B, 8.A, 9.A, 10. B

Answer to Activity #5.

2500

2000
The graph shows that as the supply of cellphone
1500
increases, the price increases. Supporting the
1000 concept of law of supply curve, wherein there would
be a movement in price as the supply increases,
500 ceteris paribus.
0
5000 5500 6000 6500 7000

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