1. Supply

2. Section 1 Understanding Supply  Law of Supply- the higher the price, the larger the quantity produced  Quantity Supplied- how much of a good is offered at a specific price

3.  Higher prices: Leads to higher profits Encourage more production Encourage more competition

4. Supply Schedules and Curves PriceQuantity Supplied $1.00100 $2.00200 $3.00300 $4.00400 $5.00500

5. Supply Curve

6.  Unlike Demand…  The higher the Price…  The higher the Quantity Supplied

7.  Just like Demand Graphs….  Increase in Supply= SHIFT RIGHT

8.  Decrease in Supply = SHIFT LEFT

9. Supply & Elasticity  In the short run supply is inelastic because firms cannot change output quickly Workers already scheduled Raw materials already purchased

10.  In the long run supply is elastic Lay off workers/ hire more workers Smaller/larger orders of materials placed  If output can be changed easily the product is elastic

11. Section 2: Costs of Production  Marginal Product of Labor- the change in output from hiring one more worker

12.  Increasing Marginal Returns- when adding a worker increases production  Decreasing Marginal Returns- when adding a worker decreases production

13. Marginal Product of Labor (chart) Labor (# of Workers) Output (Bean bags) Marginal Product of Labor 00--- 144 2106 317? 4236 5285 631? 7321 831

14. Production Costs  Fixed costs- cost that does not change no matter how much is produced Ex: rent, taxes, salaries  Variable costs- costs that rise or fall depending on the quantity produced Raw materials, hourly labor, utilities

15.  Total cost- Fixed costs plus variable costs  Marginal cost- the additional cost of producing one more unit

16. Section 3: Changes in Supply 1. Rising costs decrease supply Falling costs increase supply 2. Technology increases supply Makes us faster & more efficient

17. 3.Government subsidies increase supply Subsidies- a government payment that supports a business or market U.S. gov’t: cattle ranchers, farmers Excise taxes decrease supply ○ (sin tax) taxes alcohol, tobacco, gambling http://www.youtube.com/watch?v=CdJTJE4z0es

18. 4. Import restrictions Gov’t can’t limit number of goods entering a market 5. Expectations of future prices Inflation- the value of cash in a person’s pocket decreases over time (about 3% annually) http:// www.youtube.com/watch?v=WKZvm_fqYRM

19. 6. Number of firms producing the product More firms = more products, less firms = less products