200This chapter explains the first of the two most famous building blocks of economics: supply and demand. These tools are crucial to understanding markets and how they function to allocate goods and resources. The chapter describes the derivation of a supply curve. The concept of supply shows how quantities placed on a market respond to increases or decreases in the price of the good. Determinants of market supply are presented. Next, the concept of elasticity, or responsiveness, of producers to changes in prices is introduced. Movements along the supply curve and shifts in supply are discussed and explained.