Jan has a catering business with a modest-sized kitchen. She faces a lot of competition, but her staff is efficient and keeps waste to a minimum. If Jan gets too many orders, however, she has to hire extra staff who are not as good. Jan's supply curve for a week looks as in Column 1 (think of the price as the price of catering per person, and the quantity as the catering jobs Jan would accept per week).

a) Use Column 1 to plot Jan's supply curve. [As in question 1, for simplicity, you can assume it is a continuous line; in other words you can connect the dots given by the above]

b) Suppose that the actual price is 80. What is Jan's producer surplus? Illustrate in your figure. [The assumption made above will let you apply the formulas for producer surplus in your text.]

c) How would you explain the number you found in (b) to a friend who does not know supply curves?

d) Suppose the price increases to 90. How much does Jan supply now? As a matter of convention, do we call this an "increase in supply," or an "increase in the quantity supplied"?

e) Something changes in Jan's business. She now is willing to supply, for each price, the amounts in Column 2. Plot her new supply curve, labeling it S' in your graph.

f) What might have changed in Jans's business to cause the changes described in (d)? Briefly discuss 3 possibilities.

g) Do we call what happened in (d) an "increase in supply," or an "increase in the quantity supplied"?