Supply Law of Supply

Supply The total amount of a good or service available to buyers Law of Supply As price increases for a good or service, the quantity supplied will increase If the price of milk goes up, milk production will increase

Supply Shifters 5 shifters of supply R – Resource price E – Expectations S – Number of Sellers T – Technology T - Taxes/ Subsidies

Resource prices Prices of resources used to make a good or service can affect the supply of that good or service If resources prices increase, supply decreases Ex: If the price of wheat severely increases, the supply of bread will decrease

Expectations Producers will make decisions about supply on the market based on expectations If they know a good will get more money in a few weeks, they will hold their supply Decreasing supply (temporarily) Ex: phone companies

(S) Number of Sellers Number of producers affect the supply of a good or service If the number of producers increases, the supply of a good or service will also increase Ex: if there are more producers of TV there are, the more supply of TVs

Technology Changes in technology shift the supply curve Often as an increase (to the right) As technology increases production, supply increases Ex: cars are mostly made by machine, as a result more cars are produced in a year

Taxes/ subsidies Government involvement Subsidies: governmental monetary support When governments want firms to producer more Increase supply Taxes: money that firms have to pay the government Takes away money supply from producers Decreases supply

Graph it! 1) Microsoft invested in new technology that allows 3 Xboxes to be made in one hour. 2) The government starts harsh pollution regulations against automotive producers. What happens to Ford’s supply? 3) A recent forest fire destroyed hundreds of acres of woodlands about to be harvested. What supply is the Colorado Cabinet Store experiencing?

Changes in Supply Movement along a supply curve is a change in quantity supplied If price goes down, the quantity supplied will go up Price only changes the amount supplied Shifts of a supply curve is a change in supply Price stays the same, producers are holding back supply RESTT 5 shifters only change supply

Graph it! 1) Flower shops are preparing for the up coming Mother’s Day holiday. What does their elaborate flower bouquets supply look like now? 2) The price of juice decreased by 10% in 3 days. 3) The Federal Government provides a new subsidy for solar power panel companies. 4) The Sriracha factory is hit with a 15% tax for air purification purposes. 5) CenturyLink has now extended their cable TV services to cover all of Colorado, where Comcast has already been settled. What happens to the supply of cable TV? 6) Halloween City has opened up a block away from Halloween Mart. 7) The price of stainless steel pans goes up.

Create your own Think like a producer! Pick a product that you would sell (assume a real product) Graph 3 decreases in supply scenarios and 3 increases in supply scenarios using RESTT Describe what is happening for each shift – you are coming up with the market scenario Bonus: add a graph and scenario for your product that demonstrates a slide on the supply curve

Supply & Demand Market Equilibrium The market state where the supply in the market is equal to the demand in the market Market Economies automatically shift towards the equilibrium point

Supply and Demand Equilibrium Quantity Equilibrium Price The quantity of goods or services demanded or supplied at the equilibrium price Equilibrium Price The market price where the quantity of goods supplied is equal to the quantity of goods demanded At the point of equilibrium