SUPPLY Chapter 5 http://www.youtube.com/watch?v=Ti9p4b4Jn3Q

Supply Supply is the desire and ability to produce and sell a product. The Law of Supply – quantity supplied varies directly with its price P S P S

Supply Curve SUPPLY CURVE Price of DVDs Quantity Supplied $25 50 $20 40 $15 30 $10 20 $5 10 25 SUPPLY CURVE 20 15 10 5 10 20 30 40 50 60 Quantity

Essential Question: Why would producers be willing to supply more as the selling price rises?

Change in QuantitySupplied Change in Quantity Supplied (MOVER) is an increase or decrease in the amount supplied due to a CHANGE IN PRICE. Stay on the same supply curve What is similar between the demand & supply movers?

Change in Quantity Supplied F Price E MOVES ALONG THE CURVE D C B A Quantity

Changes in Supply Change in Supply (SHIFTER) is when selling price remains the same, but supply changes due to something other than price. Must draw a new supply curve What direction will the curve shift when supply increases? What direction will the curve shift when supply decreases? Shift Right (SR) Shift Left (SL)

Change in Supply Decrease SHIFTS LEFT Increase SHIFTS right F Price F B B A A Quantity

6 Factors for Change in Supply INPUT COSTS LABOR PRODUCTIVITY EXPECTATIONS TECHNOLOGY 6 Factors for Change in Supply GOVT ACTION # of PRODUCERS http://www.youtube.com/watch?feature=endscreen&v=pt0rdKrhN1w&NR=1

1. Input Costs Input costs are the price of the resources needed to produce a good or provide a service. Cheaper costs = supply increase Increased costs = supply decrease

Cost of production goes down Cost of production goes up

2. Technology New machinery and innovations to production. Better tech. enables companies to produce more goods.

Better technology Technology shutdown

3. Government Action Government policies can either help or hurt costs of production. Taxes, Regulations and… Subsidies: payments that help to cover some costs, encourage companies to produce a certain good. Examples Tax on cigarettes, A subsidy for farmers, The Clean Air Act

Subsidy for good Increased tax on good

4. Number of Producers With more producers, more goods or serviced are produced, and vice versa Examples: Many car companies exist due to the success of Ford. Increased competition drove out Pontiac and Saturn.

New company joins industry Company drops out of industry

5. Producer Expectations If producers expect the price of their product to rise or fall in the future, that may affect their rate of production.

Producer expects price of good to rise Producer expects price of good to fall

6. Labor Productivity Labor Productivity refers to the amount of goods and services that a person can produce at a given time. Increased productivity means supply increase and vice versa. Examples: New training method Loss of workers

New training method Loss of workers