Supply Chapter 5

What is Supply? Supply – refers to the willingness and ability of producers to offer goods and services for sale Law of Supply – states that producers are willing to sell more of a good or service at higher price (opposite of demand, in which buyers demand more of a LOWER priced item)

Supply Schedules & Supply Curves Supply schedule – a table that shows how much of a good or service an individual producer is willing and able to offer at each price (see page 132) Individual (one person) v. market (all producers) Supply curve – graph that shows how much of a good or service an individual producer is willing to supply

Activities Complete restating and interpreting economic data worksheet Complete supply curve worksheet on house cleaning/yard work

What Are the Costs of Production? Marginal product – change in total product that results in hiring one more worker Specialization – having each worker focus on a particular facet of production Increasing returns – each new worker adds more to total output Diminishing returns – each new worker causes total output to grow but at a decreasing rate (maybe they get in each others’ way, or not enough work to do, so it is a waste)

Production Costs Fixed costs – expenses owners must incur whether they produce anything or not (rent/mortgage, management) Variable costs – business costs that vary as the level of production changes (worker wages, supplies) Total costs – fixed plus variable costs Marginal costs – cost of producing one more of a unit

Earning the Highest Profit Marginal revenue – added revenue per unit of output (how much will you make for each unit) Total revenue – total income for goods sold (Price x Quantity) Profit maximizing output – when producer realizes the greatest amount of profit

Activity: Complete Production Costs and Revenues chart

What Factors Affect Supply? Input Costs Labor Productivity Technology Government Action Producer Expectations Number of Producers

Activities: Fill in Factors that Affect Supply on worksheet (you can work in groups/pairs) Once finished, turn over and answer questions on back, identifying which factor is discussed in each statement

Robert Johnson: Read about Robert Johnson and BET on page 152 What effects might BET’s success have on the supply of African-American programming?

What is Elasticity of Supply? Elasticity of Supply – measure of how responsive producers are to price changes Supply is more elastic over a longer period of time, when production can catch up with demand Ease of changing production is main factor in changing supply. It is easier to provide more dog walkers than cars

Supply Demand Review Video https://www.youtube.com/watch?v=LwLh6ax0zTE https://www.youtube.com/watch?v=ewPNugIqCUM&src_vid=LwLh 6ax0zTE&feature=iv&annotation_id=annotation_3589862329