Economics 4/11/11 OBJECTIVE: Demonstration of Chapter#4 and begin examination of supply. I. Administrative Stuff -attendance & distribution of test II. Chapter#4 Test III. Journal #15 pt.A -Examine Figure 5.1 & Figure 5.2 p.114&115 1.) How does the Law of Supply differ from the Law of Demand? 2.) Why are the supply curves upward sloping? IV. Journal #15 pt.B -notes on supply

Law of Supply The principle that suppliers will normally offer more for sale at higher prices and less at lower prices. As price goes up, quantity produced also goes up

Supply Curve: At high prices more will be supplied. At lower prices, less will be supplied. Price and quantity supplied are directly related. The drawing to the right is a typical supply curve.

Supply Schedule Supply schedule is just like the demand schedule, but the supply schedule shows both quantity supplied and price rise together. Quantity Supplied

Construct a Supply curve using the following data Quantity Supplied

On your supply curve Label the point where price is $15 and quantity supplied 4 units as point a. Next label the point where price is $20 and quantity supplied is 6 units as point b. Movement from point a to point b, or to any other point along the supply curve is movement in quantity supplied.

Movement along the Supply Curve/ Change in quantity supplied.

Change in supply A change in supply occurs when something happens to cause suppliers to offer different amounts of products for each price in the market.

Change in supply A change in supply occurs when something happens to cause suppliers to offer different amounts of products for each price in the market.

What can cause a change in supply to the right? Lower cost of inputs such as cheaper labor or cheaper packaging More productive/better trained labor. New technology like more fuel efficient delivery vehicles, better/faster machines Lower taxes/government subsidies (subsidy is a government payment to an individual or business to encourage or protect a certain economic activity.)

What can cause a change in supply to the left? More expensive labor Higher taxes Less efficient workers Broken technology Withdrawal of subsidies

Economics 4/12/11 OBJECTIVE: Examine supply elasticity. I. Journal #16 pt.A -Read “Profiles in Economics” p.121 -Answer question #1 p.121 II. Return of Chapter#4 Test III. Quiz #9 IV. Journal #16 pt.B -notes on the elasticity of supply V. Econ U.S.A. episode#16 -questions on film

Supply Elasticity Type of ElasticityChange in Quantity Supplied Due to a Change in Price ElasticMore than proportional Unit ElasticProportional InelasticLess than proportional

Supply Elasticity Supply elasticity is caused by the ability of a producer to change output. If producers can increase output quickly, supply is elastic. If producers can not increase output quickly, supply is inelastic.

Theory of Production The relationship between the factors of production (land, labor, capital, entrepreneurs) and output of goods and services. Short run – change in the variable of labor Long run – change in land & capital

Economics 4/13/11 OBJECTIVE: Examine supply elasticity. I. Journal #17 pt.A -Read “The Global Economy” p.130 -Answer questions (1-2) p.130 II. Journal#17 pt.B -notes on the theory of production III. Journal#17 pt.C -questions on film about innovation IV. Math Practice with Economics

Theory of Production The relationship between the factors of production (land, labor, capital, entrepreneurs) and output of goods and services. Short run – change in the variable of labor Long run – change in land & capital

Law of Variable Proportions Stage I – Increasing returns *output rises at an increasingly faster rate (each new worker makes more than the previous worker did) Stage II – Diminishing returns *output rises at a diminishing rate (each new worker increases output, but not as much as the previous worker did) Stage III – Negative returns *output decreases as each new worker is added

Marginal Costs & Profits

Measure of Costs Fixed cost – the cost that a business incurs even if the plant is idle and production is zero -salaries to executives -interest on bonds -rent payments -taxes -depreciation Overhead – total fixed cost

Variable costs – costs that change when output changes -hourly workers -power -freight charges -raw materials Total costs – the sum of fixed and variable costs Turn to page 133

From Poop to Profits 1.) What is innovation? What does it have to do with entrepreneurship? 2.) Why did Brad Morgan keep refining his products and processes? 3.) Why do entrepreneurs need freedom? 4.) What do the farmer and the bookstore owner have in common?

Economics 4/14/11 OBJECTIVE: Working with supply. I. Administrative Stuff -attendance & follow ups II. Quiz#10 III. Economics Lab -Supply & Demand IV. Mindjogger -video quiz on Chapter#5 Supply NOTICE: Chapter#5 Test Tomorrow!

Bell Schedule 1 st Hour- 7:41 – 8:45 2 nd Hour-8:50 – 9:55 3 rd Hour-10:00 – 11:25 1 st Lunch-10:00 – 10:25 2 nd Lunch-10:30 – 10:55 3 rd Lunch-11:00 – 11:25 11:30

Marginal Costs & Profits

Where will profits be maximized?

Directions 1.) Identify the factors of production in the film. 2.) Identify the public goods in the film.

Economics 4/15/11 mrmilewski.com OBJECTIVE: Demonstration of Chapter#5 and begin examination of price. I. Administrative Stuff -attendance & distribution of test II. Chapter#5 Test III. Journal #18 pt.A -Read “Business Week Newsclip” p.126 -Answer questions (1-2) p.126 IV. Journal #18 pt.B -notes on prices V. Journal#18 pt.C Film: I Pencil

The Week After Spring Break Monday 4/25/11 – No School Tuesday 4/26/11 – Journal#19 Wednesday 4/27/11 – Journals#11-20 Due Thursday 4/28/11 – ½ Day Conferences Friday 4/29/11 – Prom Day Saturday 4/30/11 – Hebda Cup

Schedule 1st Hour: 7:41 - 8:35 am 2nd. Hour: 8:40 - 9:30 am 4th. Hour: 9: :25 am 3rd. Hour: 10: :55 am 1st. Lunch: 10: :55 am 2nd. Lunch: 11: :25 am 3rd. Lunch: 11: :55 am 5th Hour: 12: :50 pm Assembly: 1:00 - 2:15pm

How is price determined? Price is determined by the intersection of supply & demand.

Prices as Signals Price – the monetary value of a product as established by supply & demand. Price is a signal that helps us make economic decisions. High prices are a signal for producers to produce more and consumers to buy less. Low prices are a signal for producers to produce less and consumers to buy more.

Advantages of Prices 1.) Prices in a competitive market favor neither the producer nor the consumer. 2.) Prices in a market economy are flexible. 3.) Prices have no administrative costs and answer the questions WHAT, HOW, and for WHOM to produce. 4.) You have known it your entire life.

Life without prices? Prices help allocate scarce resources, but what if there was no such thing as price? Rationing – the government determines everyone’s “fair” share. Problem with determining what is fair. High administrative stuff (cost, enforcement, etc) No incentive to work hard.

I Pencil

Questions on “I Pencil” 1.) What does Milton Friedman mean by saying there is nobody in the world who knows how to make a pencil? 2.) What kind of transaction makes a free market possible? 3.) What must be true for all parties in a voluntary transaction? 4.) What is the price system? 5.) What is the zero-sum game philosophy? 6.) What is meant by the invisible hand?