1. Changes in Supply Chapter 5 Section 3 Mr. Lopez Per.4 Economics

2. Input Costs  Any change in the cost of an input used to produce a good will affect supply  A rise in the cost of an input will cause a fall in supply at all price levels because the good has become more expensive to produce  A fall in the cost of an input will cause an increase in supply at all price levels

3. Effect of Rising Costs  Marginal Revenue vs. Marginal Cost  Marginal Revenue: (price) the additional income from producing one more unit of a good  Marginal Cost: the cost of producing one more unit of a good (includes price of input) -As supply increases it rises  Technology helps lower production costs and increases supply

4. Government’s Influence on Supply  Regulation: Govt. intervention in a market that affects the price, quantity or quality of a good  The govt. can affect supply of many goods by changing revenue or production through subsidies and/or excise taxes

5. Government’s Influence on Supply  *SUBSIDIES: a govt. that supports a business or market -given to protect a young industry from strong foreign competition -they allow the supply of a good to increase by lowering marginal cost at all levels of output  *EXCISE TAX: Tax on production or sale of a good -increases production cost -used to discourage the sale of goods who the govt. believes is harmful to public health Ex. Alcohol

6. Supply on Global Economy  It’s cheaper to produce a good in other countries  Do to govt. regulations, producers go to other countries  Other influences on Supply: -Future Expectations of Prices -Number of Suppliers

7. 3 Critical Questions:  What role does the government play in influencing supply?  What does excise tax do to the supply curve? What does a subsidy do?  How does technology influence supply?

8. Answers:  1: The government can influence supply by changing the revenue or production by providing subsidies/excise taxes  2: It shifts the demand curve to the right and a subsidy allows the supply of a good to increase by lowering marginal cost at all levels of output  3: Technology influences supply by increasing the rate of production and it’s cheaper for the producer since they don’t have to pay for labor.