Intro to Supply PRICE V. QUANTITY SUPPLIED

Today’s Objective  After today’s lesson, students will be able to…  Explain the relationship between price and quantity supplied  Essential Skill:  State implications and consequences

Fads and Demand  Each group will share what their fad was and its effect on demand  We cannot satisfy demand without a supply

What is Supply?  The amount of a good that a firm is willing to supply when looking at the price.  Quantity Supply:  The amount of a good that a firm is willing to supply at a certain price  Supply:  The amount of a good that a firm is willing to supply at any price

The Supply Curve  The supply curve slopes upward to the right.  The slope tells us that the quantity supplied varies directly in the same direction – with the price.

The Law of Supply  There is a direct relationship between price and quantity supplied.  Quantity supplied rises as price rises, other things constant.  Quantity supplied falls as price falls, other things constant.

Practice!  Hourly Wages Worksheet  First portion of the Hot Wings Worksheet

 Changes in price causes changes in quantity supplied represented by a movement along a supply curve.  For Quantity Supplied, we assume all else is equal  Again, one good that will only be affected by price Movements Along a Supply Curve

Change in quantity supplied (a movement along the curve) Change in Quantity Supplied Price (per unit) Quantity supplied (per unit of time) S0S0 $15 A 1,2501,500 B

 If the amount supplied is affected by anything other than a change in price, there will be a shift in supply. Shifts in Supply Versus Movements Along a Supply Curve

Shift in Supply Price (per unit) Quantity supplied (per unit of time) S0S0 Shift in Supply (a shift of the curve) S1S1 $15 AB 1,2501,500

Shifters of Supply  Unexpected disasters  Resources (Inputs-change in the price/availability of needed goods and services)  Government Policies (taxes, regulations, subsidies)  Expectations  Number of firms  Technological changes URGENTURGENT

Unexpected Disasters  Natural disasters, weather, and events affect the supply in negative ways  The curve will shift to the left and there will be a lower quantity supplied for each price  Cost of production and resources can increase

Resources  The price of the resources used to make a product shifts the supply curve  If inputs are less expensive, the curve shifts right  If inputs are more expensive, the curve shifts left

Government Policies  Regulations- will shift the curve left, restrictions on production  Taxes- will shift the curve left- less profit per good  Subsidies- will shift the curve right- added benefit to production

Expectations  If suppliers expect prices to rise in the future, they may store today's supply to reap higher profits later.

Number of Firms  The number of firms that produce a good  If the number of firms increases supply will increase and vice versa

Technology  Advances in technology reduce the number of inputs needed to produce a given supply of goods.  Costs go down, profits go up, leading to increased supply.

Side by Side  Comparing Demand and Supply

Practice!  Rest of Hot Wings Worksheet  Supply Review Worksheet on Shifts