Chapter 5 Section 2
Every time the supply of a good changes, the supply curve for that good “shifts” ◦ Meaning it moves either to the right or to the left ◦ Change in supply Shift in supply curve ◦ Quick video on supply Quick video on supply
If the supply increases the curve shifts to the right If the supply decreases it shifts to the left
TThese factors cause a shift in supply curves: 1.Resource prices 2.Technology 3.Taxes 4.Subsidies 5.Quotas 6.Number of sellers 7.Future price 8.Weather EOC study guide Supply & Demand #6
Resources are the factors of production— land, labor and capital ◦ When resource prices fall, sellers produce more of the good Why? ◦ When resource prices rise, sellers produce less of the good
Technology is the skills and knowledge used in production An advancement in technology means sellers can produce more output with a fixed amount of resources ◦ This advancement lowers the per-unit cost, or average cost, of production
Some taxes increase the per-unit costs ◦ Taxes are levied on the mining industry based on the value of good they are mining out of the ground ◦ Taxes are also imposed on the film industry Taxes increases the cost of doing business and causes the manufacturer to supply less output.
Subsidies are financial payments made by the government for certain actions ◦ $4 per bushel of corn (56 pounds) in 2014
Quotas are restrictions on the number of units of a foreign-produced good (import) that can enter a country ◦ Imagine the Japanese are sending 1 million cars to the US each year and the US government imposes a quota on Japanese cars at 10,000 a year What would happen in the market for cars?
More sellers means more supply Fewer sellers means less supply
Sellers who expect the price of a good to be higher in the future may hold back the good now and supply the good to the market in the future If the good is expected to be worth less in the future, sellers may dump their product on the market now
Bad weather may reduces the supply of many agricultural goods ◦ Bad weather, such as a hurricane, may also damage fishing boats, oil refineries, etc Unusually good weather can increase the supply ◦ The supply curve shifts to the… right
Only one thing can cause a change in the quantity supplied PRICE
Elasticity of supply is the relationship between the percentage change in quantity supplied and the percentage change in price Elastic supply exists when the quantity supplied changes by a greater percentage than price Inelastic supply exists when the quantity supplied changes by a smaller percentage than price Unit-elastic exists when the quantity supplied changes by the same percentage as price