SUPPLY e_choice_polls/LTEwNjEyNDUyNjE

Supply   Supply is the desire and ability to produce and sell a product.   The law of supply states that SUPPLIERS are willing to sell more of a good or a service at a HIGHER PRICE than they are at a LOWER PRICE. b4Jn3Q

Supply Curve Pt. Price of DVDs Quantity Supplied A$3060 B$2550 C$2040 D$1530 E$1020 F$510 0 Quantity Price A B C D E 60 F

Costs of Production   FIXED COSTS are expenses that businesses must incur whether they produce nothing, a little or a lot. INSURANCE RENT LICENSES, FEES

Production Costs   VARIABLE COSTS are production costs that vary as the level of PRODUCTION changes. FarmerAutomobile manufacturer Banana Republic Dairy Queen Variable costs SEEDS, FERTILIZER, WATER, WORKERS STEEL, WORKERS, MACHINES, TIRES, GLASS TEXTILES, WORKERS, ADVERTIS- ING ICE CREAM, CONES, WORKERS, SPRINKLES

Total Costs   Adding FIXED and VARIABLE gives a business their TOTAL COST.

Number of workers Total product Fixed costs ($) Variable costs ($) Total cost ($) Exercise: calculating total cost of

Changes in Supply   Change in Quantity Supplied (MOVER) is an INCREASE or DECREASE in the amount supplied due to a change in PRICE.

Quantity Price A B C D E F Change in Quantity Supplied

Changes in Supply .  Change in Supply (SHIFTER) is when supply changes due to something other than price.

Quantity Price Change in Supply A B C D E F A B C D E F

6 Factors for Change in Supply TECHNOLOGY LABOR PRODUCTIVITY INPUT COSTS # of PRODUCERSGOVT ACTION EXPECTATIONS ube.com/watch ?feature=endscr een&v=pt0rdKr hN1w&NR=1

Input Costs   Input costs are the price of the resources needed to produce a good or provide a service.   Cheaper costs = more goods supplied   Example   The cost of corn and oil go up resulting in less gas being produced.

Cost of production goes down Cost of production goes up

Technology   Technology is when one applies scientific methods and innovations to production.   Better tech enables companies to produce more goods.   Examples   Tractors allow farmers to grow more food.   Computers allow more work to be processed than typewriters.

Better technologyTechnology shutdown

Government Action   Government policies can either help or hurt costs of production.   Excise Tax, Regulations and…   Subsidies: payments that help to cover some costs, encourage companies to produce a certain good.   Examples   Tax on cigarettes, A subsidy for milk, The Clean Air Act

Subsidy for goodIncreased tax on good

Number of Producers   If a company is successful, other companies will try to copy that success.   With more producers, more goods or serviced are produced.   Examples:   Many car companies exist due to the success of Ford.   Increased competition drove out Pontiac and Saturn.

New company joins industry Company drops out of industry

Producer Expectations   If producers expect the price of their product to rise or fall in the future, that may affect their rate of production.   If expecting higher selling prices, Sony may choose to produce more PS4s now.

Producer expects price of good to rise Producer expects price of good to fall

Labor Productivity   Labor Productivity refers to the amount of goods and services that a person can produce at a given time.   Increased productivity means more goods can be sold.

New training methodLoss of workers

Elasticity of Supply   Elasticity of supply is how responsive producers are to price changes.   Elastic supply – quantity supplied will change greatly as price changes.   Inelastic supply – quantity supplied will change little as price changes.

Elastic Supply 0 Quantity Price When supply is elastic, prices will not change much, but quantity supplied will change. A B C D E F 50

Elasticity of Supply   Inelastic supply – quantity supplied will change little as price changes.

Inelastic Supply 0 Quantity Price A B C D E F When supply is in elastic, prices will change a lot, but quantity supplied will not change much.

Factor of Supply Elasticity   The only factor of elasticity for supply is the ease of changing production when the price of an item changes.   Bigger companies are inelastic in the short run as it takes time to adjust production.