Robinson and Gardner

Name: Abid Wazir

Date: Monday, April 15 2024 Hour: 2

Economics Textbook Questions: Chapter 5

Supply

Read Pages 101 – 120 (Skip section 2)

1. What does the law of supply state? Give an example of how it works in real life.

An increase in goods and services will lead to an increase in the supply of that good or
service. More doctors means more medicines will be prescribed and hence more medicines.

2. Why do high prices encourage entrepreneurs to enter a market (start making a good or
service)?
High prices will only encourage entrepreneurs if they believe that they could sell a product
for cheaper. Also, high prices indicate a lack of competition in a market. Hence lots of profit
possibility and margins.

3. What is a supply schedule? What two things does it show?

A table that shows the quantity demanded at a certain price point. The two things that it
shows is the law of demand and prices that correlate inversely with demand.

4. What is a supply curve? Which way does it slope? Why does it slope this way?

A supply curve is a graph that shows how the demand for a certain product changes or
affects the supply the seller can produce. It slopes up, since more demand means more
supply the seller will make.

5. What is elasticity of supply?

Elasticity refers to the adaptability of something given the stimuli directly affecting it. Hence,
supply elasticity refers to the change in supply based upon various factors affecting it.

6. Why is elasticity of supply related to time?

Elasticity is related to time because the elasticity of supply or demand can change based on
the length of time. In the short run, quantity supplied and quantity demanded are often
relatively slow to react to changes in price.

(Question on Back!!!!!)

1
 Robinson and Gardner
7. What are the five things that change supply? Please give an example for each one. (The
answer to this question should be lengthy!)

a. Changes in Production Costs: Fluctuations in costs, like rising oil prices impcting
transportation expenses.

b. Technolgical Advancements: Innovations that boost efficiency, such as automated

machinery in factories.

c. Taxes and Subsidies: Government changes in taxes or subsidies can alter production
costs and supply levels.

d. Natural Disasters or Climate Changes: Events like floods or droughts can disrupt
production, reducing supply, drought affecting agricultural output.

e. Government Regulations: Regulations can restrict or incentivize production; for

instance, stricter environental rules raising compliance costs or subsidies increasing
supply of certain goods.