SUPPLY e_choice_polls/LTEwNjEyNDUyNjE b4Jn3Q

Supply   Supply is the desire and ability to produce and sell a product.   The law of supply states, as prices go up, suppliers will produce more

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 are producing nothing, a little or a lot. INSURANCE RENT LICENSES, FEES

Production Costs   VARIABLE COSTS – are expenses 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 ADVERTISIN G ICE CREAM CONES WORKERS SPRINKLES

Total Cost   Adding fixed and VARIABLE gives a business their TOTAL COST. TOTAL COST = FC+VC

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. It only moves if it’s a change in the PRICE of that specific product!!!

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

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.