Warm - Up How do the owners of fast food restaurants know how much food to produce each day?

Ch 5.1 Understanding Supply

Supply Supply is the amount of goods available The ___________ is the higher the price, the larger the quantity produced. Thus the lower the price, the quantity supplied falls. The search for _____ drives the supplier’s decision. Law of Supply profit

Supply Schedule Shows the relationship between ______________ supplied for a specific good. Like a demand schedule, a supply schedule lists supply for a very specific set of conditions. Again, only looking at ______________. Other factors such as the cost of tomato sauce, labor and rent are assumed to remain _______. price and quantity price and output constant

Market Supply Schedule shows the total supply in a market. A Supply curve is the same as demand ________ the horizontal axis now measures the quantity of the good _______ not the quantity demanded. EXCEPT supplied

Elasticity & Supply Elasticity of supply measures the way suppliers respond to a change in price It is the ______________ What determines whether the supply of a good will be elastic or inelastic? The key factor is time. SAME AS DEMAND

TIME Time is the key factor in determining whether the supply of a good will be elastic or inelastic In the _______, firms are more _______, so supply is more elastic In the ________, companies are ___________ –Ex. Orange grove … takes years to grow(inelastic) –Haircut – need more, hire workers, if less workers go elsewhere(elastic) long run flexible short run less elastic

Elastic or Inelastic? Price of apples increase Price of an oil change Price of dry cleaning services Price of football tickets Hotel rooms Taxi rides Photographs Taxi rides

Ch 5.2 Cost of Production

Labor and Output Marginal Product of Labor –Change in output from hiring one more worker (look at Figure 5.6 p. 109) –Specialization increases output per worker, so the second and third worker add more to output than the first…= INCREASING MARGINAL RETURNS BUT get DIMINISHING MARGINAL RETURN with the 4 th - 7 th worker hired and NEGATIVE MARGINAL RETURN with the 8 th worker

_________ marginal returns – specialization _____________ per worker ___________ marginal returns – adding more workers increases total output, but at a _________ rate. _________ Marginal Returns – is an actual decrease in output. Increasing increases output Diminishing decreasing Negative

Production Costs (p. 111) Fixed Cost –Does __________ no matter how much produced. (ex. Rent, taxes on a factory) Variable Cost –Rise or fall depending on ________________. ( ex. Electricity, labor) Total Cost –Fixed plus variable = total Marginal Cost –The additional cost of producing ____________. not change quantity produced one more unit

Setting Output The best level of output is to find the output level where marginal revenue is equal to marginal cost. IPHONE

To Shutdown or to not shutdown If shuts down – still have to pay ________ Sometimes keeping a money-losing factory open is the better choice Amazon.com (next class) v. Circuit City fixed costs

BUSINESS… Create a business –Give it a name –Tell me what you produce & whether it is an inferior good, a complement, a necessity or a luxury good –Do you EXPORT – Where? create a supply schedule for that product make a supply curve (p. 105) Then take that business & decide how many employees to hire... what are your fixed and variable costs? CREATE AN ADVERTISEMENT OR CARD FOR YOUR BUSINESS… And for homework…

Your Supply Market We are going to hold a Market auction in class. Next class: Bring in an item to contributeBring in an item to contribute this will be a 100% quiz grade & will allow you to participate in the game. this will be a 100% quiz grade & will allow you to participate in the game. I am not telling you how much to spend or to not spend – be creative – maybe your job or parent can donate something from work –I am not telling you how much to spend or to not spend – be creative – maybe your job or parent can donate something from work – You will get as many dollars as your percentage in class to use for exchange.You will get as many dollars as your percentage in class to use for exchange. If you win the bidding war – you win the itemIf you win the bidding war – you win the item If the class does not bring anything – then we will have a quiz instead If the class does not bring anything – then we will have a quiz instead

WARM-UP List 3 goods: one that is usually available and “on sale,” another that is popular but difficult to find, and a third that falls in- between...what prices do stores charge for these products?

Ch 5.3 Changes in Supply

INPUT Any change in the _____ of an input used to produce a good – such as raw materials, machinery, or labor – will affect supply. A rise of ______ causes a fall in _______ at all price levels. A fall in input will cause an ________ in supply at all price levels. cost inputsupply increase

Technology _______ costs and increases supply at all price levels –This shifts the supply curve to the ____ Lowers right

Government & Supply Subsidies –Government payment that supports a _________________. Ex. Farms Taxes –Excise tax is a tax on the _________________ of a good Who does this hurt? lower income –Ex: Alcohol, cigarettes Regulation –Government intervention in a market that affects the price, quantity, or quality of a good. –This can _____________ supply indirectly and often increases price. business or market production or sale raise or lower

Other influences Future price expectations of prices. –If the seller expects the price of a good to rise in the ______, the seller will ____ the goods now in order to ________ in the future. On the other hand, if the price of the good is expected to ____ in the near future, sellers will earn more money by placing goods on the market ___________ before the price falls. Expectations of higher prices will ____________ now and increase supply later, and expectations of lower prices will have the opposite effect. futurestore sell more drop immediately reduce supply

Number of suppliers producing a good –If more suppliers enter a market to produce a certain good, the market supply of the good will ____, and the supply curve will shift to the _____. On the other hand, if suppliers stop producing the good and leave the market the swill decline. rise right

Toe mae toe…Ta ma toe, Poe tae toe…Poe ta toe Present a scenario in which the supply of tomatoes or potatoes is affected by each Role's input costs (ex. Higher wage, lower fertilizer costs) Create and present the scenario & how it changes the supply of tomatoes ROLES: farm worker, grocery clerk, fertilizer salesperson, production technology sales rep, tomato/potato grower Put on butcher paper & create a Supply Curve