Marginal cost functions of the firms within the industry (MC above AVC)

Short term supply is largely fixed and predetermined 

Supply effect of producer or input price changes are lagged 

Represent reponse of producers to a change in price of commodity 

Increase price = producers produce more 

Price elasticity  = % change in output from a 1% change in price 

Major input costs

Price of substitutes

Current supply 

Seasonality of product 

Usually between 0 and 2

If a short length of time, elasticity is closer to 0

Crops have higher supply elasticities if planted annually

If crops are harvested more than 1 time per year they will respond faster to price changes

Crops grown with technology tend to be more price elastic 

Used to represent the response of consumers to the changes in price of a commodity 

Increase price = decrease consumption 

Movement along demand curve when PRICE OF GOOD changes 

Price of product

Price of related good

Consumer preference

Consumer income 

% change in response to 1% change in price

Shows slope of demand curve. Usually between -0.4 to -3 

Inelastic - staple products, few substitutes. 0 to -1

Elastic - luxury goods, goods with many substitutes 

% change in demand for one commodity in response to 1% change in income for end user

Inferior - less desirable products with many substitute. Decrease consumption as income increases

Normal - most foods expect meat and niche products. Increase consumption with income, but budget share falls

Superior - meats and foods consumed outside of the home. Elasticity greater than 1

Inelastic Demand - low price, high quantity

Elastic Demand - high price, low quantity

Inelastic Supply - high prices, high quantity

Elastic Supply - low prices, low quantity 

Inelastic Demand - low price, high quantity