Survey Results: Supply Schedule

Below you will find a table containing the results of an interview with the president and VP for finance. At the interview they were given the same survey, but they were asked how many applicants they would accept at each tuition rate. During the interview they indicated that they would accept more applications as tuition went up because they could open up some unused space on campus and pay more to bring on additional faculty and staff.  At a price of $12,000, the president indicated he could make space for 17,800 applicants, but if the price (tuition) were to be $6,000, he would only have openings for 16,600.  As the price increased $6,000 we lost 1,200 applicants. In technical terms, the increase in the price of school (tuition) by $6,000 caused an increase in the quantity supplied by 1,200.

Original Supply Survey Results

We are now ready to take a somewhat different look at this information.  It is now time to look at a graphical representation of the data.   If we return to the survey results and graph the relationship between the price (tuition) and quantity (number of students), we obtain the following graph.  At a price of $15,000, the university will supply seats for 18,400 students at the university.   This is called the supply curve.

Before we move on, please take a moment to make a short list of the factors that you would expect to have influenced the administrators' decision. Would their answers have been different if faculty had asked for, and received, a salary increase?  What if energy costs were higher?  What if some new technology greatly reduced the cost of administrative work?  If costs of running the university were lowered, we would expect that for each tuition rate, the president would make space for more applicants.  In fact there are spaces for 1,000 more applicants being made available at each price.  In more technical terms, we would say that in response to the decreased costs, the university had experienced an increase in supply.

Supply Survey Results with Lower Costs

How do we represent the increase in supply? As you can see from the graph below, an increase in supply shows up as an outward shift in the supply curve.

Demand

Market