The Law of Supply Assignment • Supply is a powerful force in a free market. In two to three sentences, explain some of the factors that cause shifts in supply and what effects these shifts may have. Shifts in supply occur when the amount of goods available increases or decreases. Shifts in supply can happen when prices change, when competitors produce similar goods, or when the availability of labor or resources changes. • According to this graph, at $10 the quantity supplied is about 14 • As the price of the good rises, the quantity supplied will increase • A good is considered elastic when producers can quickly supply more or less of it based on changing prices. • A good is considered inelastic when producers cannot quickly change how much of it is supplied when prices change. • In the sample scenario, what does this mean about the elasticity of wheat in relation to supply? Wheat is relatively inelastic. • Based on the information presented in the scenario, which factor is affecting the supply created by the furniture company? Ability to produce • As the price of jeans rises, the quantity supplied is increasing • When the price per pair is $50, the quantity supplied is 40 • As the price increases from $20 to $60, the quantity supplied increases by 40 • Which change is illustrated by the shift taking place on this graph? A decrease in supply