Page 102 - Krugmans Economics for AP Text Book_Neat

figure 6.1 The Supply Schedule and the Supply Curve

Price of
coffee beans
(per pound) Supply Schedule for Coffee Beans
Quantity of
Price of coffee beans
coffee beans supplied
Supply (per pound) (billions of pounds)
curve, S
$2.00 $2.00 11.6
1.75 As price rises, 1.75 11.5
the quantity
1.50 supplied rises. 1.50 11.2
1.25 1.25 10.7

1.00 1.00 10.0

0.75 0.75 9.1
0.50 0.50 8.0

0 7 9 11 13 15 17
Quantity of coffee beans
(billions of pounds)

The supply schedule for coffee beans is plotted to yield The supply curve and the supply schedule reflect the fact
the corresponding supply curve, which shows how much that supply curves are usually upward sloping: the quan-
of a good producers are willing to sell at any given price. tity supplied rises when the price rises.

this relationship as the law of supply. Generally, the price and quantity supplied are
positively related. So just as demand curves normally slope downward, supply curves
normally slope upward: the higher the price being offered, the more of any good or
service producers are willing to sell.

Shifts of the Supply Curve
Compared to earlier trends, coffee beans were unusually cheap in the early years of the
twenty-first century. One reason was the emergence of new coffee bean–producing
countries, which began competing with the traditional sources in Latin America. Viet-
nam, in particular, emerged as a big new source of coffee beans. Figure 6.2 illustrates
this event in terms of the supply schedule and the supply curve for coffee beans.
The table in Figure 6.2 shows two supply schedules. The schedule before new pro-
ducers such as Vietnam arrived on the scene is the same one as in Figure 6.1. The sec-
ond schedule shows the supply of coffee beans after the entry of new producers. Just as
The law of supply says that, other things a change in the demand schedule leads to a shift of the demand curve, a change in the
being equal, the price and quantity supplied supply schedule leads to a shift of the supply curve—a change in supply. This is
of a good are positively related. shown in Figure 6.2 by the shift of the supply curve before the entry of the new pro-
A change in supply is a shift of the supply ducers, S 1 , to its new position after the entry of the new producers, S 2 . Notice that S 2
curve, which changes the quantity supplied at lies to the right of S 1 , a reflection of the fact that the quantity supplied increases at
any given price. any given price.
A movement along the supply curve is a As in the analysis of demand, it’s crucial to draw a distinction between such
change in the quantity supplied of a good that changes in supply and movements along the supply curve—changes in the quan-
is the result of a change in that good’s price. tity supplied that result from a change in price. We can see this difference in
60 section 2 Supply and Demand