Factors that Affect Supply

Movement along the curve is because of change in price. Demand Curves Movement vs. Shift Movement along the curve is because of change in price. Price ↑ = ↑ Quantity Supplied Price ↓ = ↓ Quantity Supplied Shift occurs because of any change other than price. Increase in Production Costs = ↓ Quantity Supplied Hired better workers= ↑ Quantity Supplied

Changes/Movement in Quantity Supplied Def: an increase or decrease in the amount of a good or service that producers are willing to sell because of a change in price. Example: If you are a farmer selling tomatoes and the price of tomatoes has increased from $1 per to $3 per pound then the quantity supplied would increase. You can make more money if you sell more tomatoes

III. Factors that Shift Supply Production Costs Def: the price of the resources needed to produce a good or service. Example: You make granola bars that contain peanuts. If the price of peanuts increases, your costs increase. You can no longer afford to produce as many bars, your supply curve shifts to the LEFT. Labor Productivity Def: the amount of goods and services that a person can produce in a given time. Increasing productivity decreases the costs of production which will increase supply. Example: A better trained, & more skilled workers can produce more goods in less time. Shift to the RIGHT

c. Technology Tech can result in new production methods which can allow you to make goods more efficiently. Shift to the RIGHT. d. Government Action Government action can affect costs of production both positively and negatively. Negative. Excise tax: a tax on the production or sale of a specific good or service. Example: Tax on tobacco. The tax increases producers’ costs and will then decrease the supply of these items. Positive. Subsidies: purpose is to encourage the sale of an activity or item. Example: supply of ethanol, a gas substitute made from corn

e. Producer Expectations If producers expect the price of their product to rise or fall in the future it will affect how much they are willing to produce. Example: If a manufacturer believes that the price of their product will rise, they may run the factory for an extra shift or invest in more equipment to increase supply. f. Number of Producers When a company develops a successful new idea other producers will enter the market and increase the supply of the good or service. Example: You are the only person at Partridge Creek selling ice cream cones. Then 3 months later, 4 other vendors start selling at the mall. Because there are more ice cream cones in the market, the supply has increased.