Understanding the Law of Supply: How Prices Influence Production

Economics Grades High School 8:24 Video
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Lesson Description

This lesson explores the fundamental economic principle of the Law of Supply, examining how changes in price affect the quantity of goods producers are willing to supply in the market. Using real-world examples and graphical representations, students will learn to analyze supply schedules and curves.

Video Resource

Law of supply | Supply, demand, and market equilibrium | Microeconomics | Khan Academy

Khan Academy

Duration: 8:24
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Key Concepts

  • Law of Supply
  • Quantity Supplied
  • Supply Schedule
  • Supply Curve
  • Price Incentive

Learning Objectives

  • Students will be able to define the Law of Supply and explain its relationship between price and quantity supplied.
  • Students will be able to construct and interpret a supply schedule and a supply curve.
  • Students will be able to analyze how changes in price impact the quantity supplied of a good or service, holding all other factors constant.

Educator Instructions

  • Introduction (5 mins)
    Begin by introducing the concept of supply as the other half of the supply and demand equation. Briefly review the Law of Demand from previous lessons. Ask students for examples of when they have seen prices affect how much of a product is available.
  • Video Viewing (10 mins)
    Play the Khan Academy video on the Law of Supply. Instruct students to take notes on the key definitions and examples provided.
  • Discussion and Clarification (10 mins)
    After the video, facilitate a class discussion to clarify any confusing points. Emphasize the difference between 'supply' (the entire relationship) and 'quantity supplied' (a specific point on the curve). Review the grape farmer example.
  • Supply Schedule Activity (15 mins)
    Divide students into small groups and provide them with a hypothetical product (e.g., apples, t-shirts). Have them create a supply schedule for that product, listing different prices and the corresponding quantity that producers would be willing to supply. Then, have them plot the supply curve on a graph.
  • Real-World Application (10 mins)
    Discuss real-world examples of the Law of Supply, such as how increased oil prices lead to increased oil production, or how higher prices for certain crops encourage farmers to grow more of them. Explore scenarios where the law of supply might not hold true in the short term.

Interactive Exercises

  • Supply Curve Shifting Simulation
    Use an online simulation tool (if available) to demonstrate how the supply curve shifts in response to changes in factors other than price (to be covered in subsequent lessons), such as technology, input costs, or government regulations. While this lesson focuses on movement *along* the curve, briefly previewing shifts will help prepare students for later lessons.

Discussion Questions

  • How does the Law of Supply affect the decisions of businesses?
  • Can you think of any situations where the Law of Supply might not apply?
  • How is the Law of Supply related to the concept of profit?

Skills Developed

  • Analytical Thinking
  • Data Interpretation
  • Graphing Skills
  • Economic Reasoning

Multiple Choice Questions

Question 1:

According to the Law of Supply, what happens to the quantity supplied of a good when the price increases?

Correct Answer: It increases.

Question 2:

What is a supply schedule?

Correct Answer: A table showing the relationship between price and quantity supplied.

Question 3:

What does a supply curve represent?

Correct Answer: The relationship between price and quantity supplied.

Question 4:

If the price of wheat increases, what is most likely to happen to the quantity of wheat supplied?

Correct Answer: It will increase.

Question 5:

What is the term for the specific amount of a good that producers are willing to sell at a particular price?

Correct Answer: Quantity Supplied

Question 6:

Which of the following typically motivates producers to supply more of a product?

Correct Answer: Higher prices

Question 7:

In the context of the Law of Supply, what does 'all else equal' mean?

Correct Answer: That all other factors affecting supply are held constant.

Question 8:

A point on the supply curve represents:

Correct Answer: A specific quantity supplied at a given price

Question 9:

What typically happens to the supply curve if the cost of producing a good increases (holding price constant)?

Correct Answer: The supply curve shifts to the left.

Question 10:

An incentive for producers to increase quantity supplied is generally driven by what factor?

Correct Answer: Increased Market Prices

Fill in the Blank Questions

Question 1:

The Law of Supply states that as price increases, the __________ __________ also increases.

Correct Answer: quantity supplied

Question 2:

A __________ __________ is a table showing the relationship between price and quantity supplied.

Correct Answer: supply schedule

Question 3:

The graphical representation of the relationship between price and quantity supplied is called a __________ __________.

Correct Answer: supply curve

Question 4:

According to the law of supply, producers are willing to supply more of a good when prices are __________.

Correct Answer: higher

Question 5:

The specific amount of a good that producers are willing to sell at a particular price is known as __________ __________.

Correct Answer: quantity supplied

Question 6:

When constructing a supply schedule, it is important to assume that __________ __________ __________ remain constant.

Correct Answer: all else equal

Question 7:

An increase in price provides an __________ for producers to supply more of a product.

Correct Answer: incentive

Question 8:

A supply curve typically slopes __________ from left to right.

Correct Answer: upward

Question 9:

Changes in price cause movement __________ the supply curve.

Correct Answer: along

Question 10:

The law of supply is a fundamental principle in __________ economics.

Correct Answer: micro

Educational Standards

SOC.9-12.E.3.1:Analyze how price and non-price factors affect the demand and supply of goods and services available in the marketplace. SOC.9-12.E.3:Explain how prices are set in a market economy and will determine how price provides incentives to buyers and sellers. SOC.9-12.E.1.1:Define and apply basic economic concepts of money supply, scarcity, surplus, choice, opportunity cost, cost/benefit analysis, risk/reward relationship, incentive, disincentive, and trade-off to a variety of economic situations.

Teaching Materials

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