Supply- Amount of a good or service that a producer is willing to sell at each particular price -Law of Supply- the higher the price, the larger the quantity produced P = QS

Supply Schedule- lists how much of a good a supplier will offer at different prices Market Supply Schedule- lists how much of a good ALL suppliers will offer at different prices

Price of SmoothieSmoothies supplied per day $110 $220 $330 $440 Supply Schedule

0 $1 $2 $3 $ Price Quantity Supplied/Output Supply Curve

Price of SmoothieSmoothies supplied per day $11000 $22000 $33000 $44000 Market Supply Schedule

$1 $2 $3 $4 Price Quantity Supplied/Output 1,0002,0003,0004,000 Market Supply Curve

What causes producers to vary their supply of goods & services PROFIT - producers actions are based on the pursuit of profit - Amount of money remaining after producers have paid all of their costs - Make a profit when incoming revenues are greater than costs of production

Production Costs *O perating Cost- cost of operating a facility (factory or store) 1. Fixed Cost- cost that doesn't change E xamples: rent, interest on loans, property insurance premiums, local and state property taxes, and salaries Overhead - Total Fixed Costs

2. Variable Cost- cost that rises or falls depending on how much is produced - Examples: raw materials, wages, etc 3. Total Cost = fixed cost + variable cost 4. Marginal Cost- cost of producing one more unit of a good

Prices for sports team memorabilia may increase during a successful season. How does this increase reflect the law of supply?

Supply Shifts REMEMBER A CHANGE IN PRICE IS ALWAYS A MOVEMENT ALONG THE CURVE

Determinants of Supply 1. Price of Resources 2. Government Tools 3. Technology 4. Competition 5. Price of Related Goods 6. Producer Expectations

Price of Resources Resource: anything that is used in the production of a good or service - ex: wages, electricity, raw materials

Government Tools Tax: required payment of money to the government to help fund government services - Businesses pay taxes on the materials, property and profit - EX. Higher Taxes, businesses are faced with higher costs of production & prospects of making less profit & will supply less of their product, supply curve will shift to the ________

Subsidies: payments to private businesses by the government ex. Wheat Excise Tax: are taxes paid when purchases are made on a specific good ex. Gasoline, Tobacco Government Tools

Technology Can have a powerful impact on supply, such as a new tool or chemical process New technology makes the production more efficient and less expensive New automatic espresso machines have made the process of producing drinks at Starbucks more efficient and very fast.

Competition Competition tends to increase supply Lack of competition tends to decrease supply

Another example of Competition: Recently a Cold Stone Creamery was put up next to a local ice cream shop in Wadena. Cold Stone Creamery Local Ice Cream Shop

Price of Related Goods Supply for one good often is connected to the supply for its related goods Change in a products price can affect the supply for the product’s related goods The price of cocoa has risen tremendously in the past few weeks. What impact will this have on the supply of mocha based drinks?

Producers Expectations Supply will vary on the expectations of the producer Good expectations = good supply, bad expectations = low supply Summer weather is coming soon. McDonalds is aware of this & wants to change their McCafe menu. What will McDonalds do to meet the needs of their consumers?

Pizza Ranch decides to only carry Pizza because prices for chicken has drastically risen. P Q S Pizza

P Q S Starbucks baristas no longer have to hand write drink specifications onto the paper cups for the drink makers at the espresso machine. A new order-printing- sticker system has been devised to make the assembly line of drink making a much faster process. Starbucks Products

Recently, all Subway stores in the Twin Cities area have offered a deal of “buy 1 sub sandwich and receive a coupon for ½ off your next sub sandwich.” What will happen to the Jimmy John's down the street? P Q S Subway Jimmy John's P Q S

All food industries (including coffee and beverage stores) have been subjected to new, very strict FDA policies on how food and beverages must be delivered, stored, distributed and discarded of. P Q S

Productivity Their resources are being used in production Look at productivity to maximize your profits Total Product - All of a product a company makes in a given time period, with a given amount of input

Marginal Product - change in output generated by adding one more unit of input

Labor & Output M arginal Product of Labor- change in output from hiring one additional unit of labor 1. Increasing Marginal Returns- level of production in which the marginal product of labor increases as the number of worker increases 2. Diminishing Marginal Returns- marginal product of labor decreases as number of workers increases

Elastic Supply Exist when a small change in price causes a major change in the quantity supplied Products with elastic supply can be made: 1. Quickly 2. Inexpensively 3. Using a few readily available resources EX. Sports teams’ souvenirs: T-shirts, posters, hats

Inelastic Supply Price change has little impact on quantity supplied Products are inelastic if production requires a great deal of: 1. Time 2. Money 2. Not readily available resources Ex. Gold, fine arts, space shuttles, lake lots (supply is usually fixed)