Bellwork Complete the table Q (FC) (VC) TC (FC+VC) MC MR (P) TR Profit (TR –TC) 300 50 1 80 2 120 3 150 4 200 5 270 6 360 7 480 8 630 9 820 10 1060

5.3 Changes in Supply EQ: What are the monetary and nonmonetary incentives that cause changes in supply? By Brandon Archie

After studying this section you will be able to: Identify how determinants such as input costs create changes in supply Identify three ways that the government can influence the supply of a good Understand supply and demand in the global economy Analyze the effects of the other factors that affect supply EQ: What are the monetary and nonmonetary incentives that cause changes in supply?

Forces that affect supply Push output out!!! Cut back man!! Forces that increase supply Forces that DECREASE SUPPLY -Decrease in production costs -Increase in technology -government subsidies -expectations of future lower prices -more firms entering the market -Increase in production costs -Excise tax -government regulations -expectations of future higher prices -firms leaving the market EQ: What are the monetary and nonmonetary incentives that cause changes in supply?

Input Costs EFFECT OF RISING COSTS TECHNOLOGY A supplier sets output to the most profitable level where MC =MR, so a rise in the price of inputs translates into higher marginal costs. Because a firm has no control over price, the only solution is to cut production until the new MC is equal to the Price. Advances in technology result in a drop in input costs. Technology lowers costs and increases supply at all price levels EQ: What are the monetary and nonmonetary incentives that cause changes in supply?

The government has the power to affect supply using subsidies, taxes and regulations A subsidy is a government payment to support a business or market An excise tax is a tax on the production or sale of a good, making it more expensive to produce. A regulation is government intervention to affect price, quantity or quality of a good EQ: What are the monetary and nonmonetary incentives that cause changes in supply?

Examples of government intervention In the United States, the federal government subsidizes the farm industry. Farmers are paid to take land out of cultivation to keep prices high Excise taxes are used to discourage the sale of goods that the government sees as harmful, like cigarettes, alcohol and high-pollutant gas. In the 1970s, the federal government required car manufacturers to install technology to reduce pollution, thereby increasing the cost of manufacturing cars and reducing the supply. EQ: What are the monetary and nonmonetary incentives that cause changes in supply?

Events that Can Lead to a Change in Demand Economics Events that Can Lead to a Change in Demand A Change in Consumer Income A Change in Consumer Tastes A Change in the Price of Substitutes A Change in Demand A Change in the Price of Complements A Change in Consumer Expectations A Change in the Number of Consumers

Events that Can Lead to a Change in Supply Economics Events that Can Lead to a Change in Supply A Change in The Cost of Inputs A Change in Productivity A Change in Technology A Change in Taxes and Subsidies A Change in Producer Expectations A Change in Supply A Change in Government Regulations A Change in the Number of Sellers

Changes in Supply and Demand – Partner Activity NAME ___________________________ Economics Changes in Supply and Demand – Partner Activity Your assignment is to create six examples of events that could impact the market price of various commodities. List the commodity and then describe a hypothetical event that would change either the supply or demand for that commodity. Your partner will then create six separate graphs to demonstrate how these events will change the supply or demand and thus the market price. Three of these events should impact supply and the other three should impact demand. Do not tell your partner which is which. Commodity Event Example: Orange Juice Example: A late season frost damages the citrus crop in Florida 1. 2. 3. 4. 5. 6. Exchange these examples with a partner and then create a separate graph (on one sheet of graph paper) to demonstrate each example. Each graph should: include a title, have the price & quantity axis properly labeled, have each supply and demand curve properly labeled, and demonstrate the change in market price as indicated with MP¹ and MP². Attach this sheet to your graphs when finished.