Standard: Students will examine and analyze economic concepts such as supply, so that they may understand the production, distribution, and consumption of goods and services in our capitalistic system.

Supply - - The willingness and ability of producers to produce and sell. Quantity Supplied - - The number of units of a good produced and offered for sale at different prices.

. . . . . . . . Supply Schedule Price Supply $30 3,500,000 $30 3,500,000 $27 3,200,000 $24 2,900,000 $21 2,500,000 $18 2,100,000 $15 1,600,000 $12 1,100,000 $ 9 800,000 . . . . . . . . 1 2 3 4

Law of Supply - - As the price goes up, the quantity supplied goes up, and as the price goes down, the quantity supplied falls.

Producers (suppliers) like higher prices because they see profit potential.

Sometimes a producer must raise prices if they want to increase output. They need the extra money to cover costs of more employees, trucks, supplies, machines, etc.

**Just like demand, supply can increase or decrease for reasons other than price. A new curve must be drawn. Decrease Increase

Non-price Determinants of Supply -Price of inputs -Technology -Number of Firms in Industry -Taxes -Subsidies -Quotas -Weather

Factors Stopping Producers from Increasing Supply Increased costs in the factors of production 2. Time lags

**When the price of a product increases, more producers may enter the market. (Competition) Some producers must wait for the price increase to cover their start up costs.

Examples of production costs - - -hire more employees -buy more machines -overtime pay -machine repair

. . . . . . . . Supply Schedule Price Supply $30 3,500,000 $30 3,500,000 $27 3,200,000 $24 2,900,000 $21 2,500,000 $18 2,100,000 $15 1,600,000 $12 1,100,000 $ 9 800,000 . . . . . . . . 1 2 3 4

**Theory of Production** -Deals with the relationship between the input of factors of production and the output of goods and services. -Looks at the Law of Variable Proportions as it applies to production.

3 Stages of Production (Stages of the Law of Variable Prop) 1. Increasing Returns-- -Each new input helps total output rise -Each new input contributes more than the output before. (marginal product)

2. Diminishing Returns-- -Each input helps total output rise, but each helps less than the one before it. 3. Negative Returns-- -Each input begins to decrease total output.