With the businesses you created what was your ultimate goal? How do you accomplish this?

The Goal is to make profit

CH 4: DEMAND – Consumer perspective related to BUYING stuff (goods and services) CHAPTER 5: SUPPLY – Producer perspective related to MAKING stuff (goods and services)

WHAT ARE YOU WORTH? Rate for Labor per Hour # of Students willing to work at such rate $8.50/hr $10.00/hr $11.50/hr

YOU ARE A PRODUCER! ….OF WHAT??? LABOR

PRODUCTION MENTALITY Given the choice, each of you would prefer to work for $11.50 per hour rather than $8.50 per hour. Each of you would prefer to earn more money rather than less as a laborer. This is the way PRODUCERS think…. Given the choice, producers would rather sell their goods/services for high prices instead of low prices.

SUPPLY The willingness and ability of producers to make goods and services available for sale in the market at various quantities and various prices

SUPPLY SCHEDULE A table of prices and quantities that shows amounts of a product producers are willing and able to make available for sale at a set of prices during a specific time period.

SUPPLY SCHEDULE for Swimsuits Price Quantity Supplied 15 ???? 14 ???? 13 ???? 12 ???? 11 ????

SUPPLY CURVE A graph of prices and quantities that shows amounts of a product producers are willing and able to make available for sale at a set of prices during a specific time period.

Supply Curve Qs P S

Law of Supply The Quantity Supplied (offered for sale) varies directly with price. If price goes up, producers will offer greater quantities for sale. If price goes down, producers will offer smaller quantities for sale.

DEMANDPRICESUPPLY

DEMANDPRICESUPPLY

Change in Quantity Supplied * Caused by an immediate change in the PRICE of the item you want to sell * Example: Crombie’s Store will offer 5 HDTV units at a reduced price of $400, but it will offer 25 HDTV units for sale at $750. Crombie’s Store would prefer to sell more HDTVs at higher prices rather than lower prices. * A change in quantity supplied is illustrated by movement ALONG a supply curve, from point to point as the price of the good or service changes.

Supply Curve Qs P S

Change in Supply Caused by one of seven determinants of supply a change in Supply is illustrated by a new Supply curve Increase in supply moves the curve to the RIGHT Decrease in supply shifts the curve to the LEFT

Supply Curve Qs P *Increase in Supply – Curve shifts from S to S1 *Decrease in Supply – Curve shifts from S to S2 S S2 S1

DETERMINANTS OF SUPPLY 1.Cost of Inputs 2.Productivity 3.Technology 4.Number of Sellers 5.Taxes and Subsidies 6.Expectations 7.Government Regulations

Cost of Inputs/Resources I own a Flower shop in PA and sell Brazilian Daisies (not sure if they exist) to my customers There is flash flooding and mudslides in Brazil The price of Brazilian Daises increases, causing the cost of my INPUT or RESOURCE to increase I have less Brazilian Daisese to offer for sale (decrease in supply/production)

Productivity/Efficiency EX: I employ a bunch of high school kids at my sandwich shop who hate to work. They lower my productivity because they are slow in waiting on customers (decrease in supply/production) EX: I hire 2 great workers to help during the lunch rush, increasing the number of happy customers we serve (increase in supply/production)

Technology EX: I purchase a new conveyor belt for my toy manufacturing plant, which speeds up production and increases the supply/production of toys EX: My business computer systems crashes and production comes to a halt, decreasing supply/production

Number of Sellers EX: Pizza Shops – There are a bunch of them. This increases the supply of pizza on the market. EX: Master Sculptors / Brain Surgeons / MVP Professional Athletes– Not so many of them. This decreases the supply of sculptor/surgical/athletic services on the market.

TAX TAXES are paid BY producers TO the government as a “fee” for the right to work and/or sell goods and services. TAXES take money away from producers, decreasing production/supply. EX: Natural Gas Extraction Tax – paid BY drilling companies to the state government EX: SALES TAX – paid BY McDonald’s to the government TAXES ON PRODUCERS ARE OFTEN PASSED ON TO CONSUMERS

SUBSIDY SUBSIDIES are paid BY the government TO producers to encourage or protect a certain economic activity. Subsidies can increase or decrease production/supply EX: Farmers receive subsidies FROM the government to grow more corn, to encourage ethanol production (increase) EX: State universities receive subsidies from the PA government to help keep tuition costs down for residents (increase) EX: Car companies receive subsidy to stop producing trucks and SUVS (decrease)

Expectations Anticipation of future events / price changes can increase or decrease supply EX: BP expects the price of oil to increase next week, so it offers less supply of gas for sale now (at lower prices) EX: BP expects the price of oil to decrease next week, so it offers more for sale (at higher prices) this week

Government Regulations Laws impact the ability of producers to work efficiently EX: Manufacturing plants have to follow safety laws and regulations to protect workers (goggles, hard hats, etc.), increasing the cost of production and cause manufacturing to decrease EX: Health inspectors can shut down a restaurant that is not sanitary (decrease in supply)

A farmer gets a subsidy from the government to grow corn –Change in Supply A business realizes it can make more profit if supplies more shorts for $30 instead of $25 –Change in Quantity Supplied Men’s Warehouse expects High school proms to be occurring in May so they increase the supplies of Tuxedos –Change in Supply Its April and you and your friend want Ice Cream you can go to DQ, Rita’s, Baskin Robins, or Bruesters –Change in Supply Its spring and baseball season has started. People want more baseball stuff. Businesses charge more for those things and provide more of baseball stuff. –Change in Quantity Supplied

Supply Elasticity Tell me how much of a change in supply there as a result of a change in price

Elastic When there is a large change in the quantity supplied as a result of a small change in price Ex. Candy prices go down $1 causing a Candy shop to double the supply of candy.

Inelastic When there is little to no change in the quanitty supplied as a result of a small change in price. Ex. Car prices go up $20. Ford motor company does not change its supply of cars.

Determinants of Supply If it takes very little time or resources to make something (Candy) then the good is said to be more elastic. If it takes a lot of time or a great amount of resources the good is said to be more inelastic (Natural gas, oil, cars, factories etc…) Think big things.