1. Price
Quantity Demanded $1
100 $2 90 $3 70 $4 40
Law of Demand:
At a given point in time, a rise in price causes a fall in quantity demanded.
At a given point in time, a fall in price causes a rise in quantity demanded.
WE KNOW PRICES CHANGE DEPENDING ON DEMAND FOR A PRODUCT AND HOW MUCH IS SUPPLIED, SO WHAT DETERMINES SUPPLY?

2. SUPPLY:
SUPPLY IS ALWAYS EXPRESSED THROUGH PERSPECTIVE OF THE: SELLER/FIRM/PRODUCER
Supply involves the relationship between price and quantity (supplied).
Quantity Supplied is the amount that producers wish to sell at various prices.
SUPPLY AND QUANTITY SUPPLIED ARE NOT THE SAME THING! QUANTITY SUPPLIED REFERS TO HOW MANY OF A GOOD WILL BE BOUGHT & WILL ALWAYS BE A NUMBER

3. Think about hotel rates for Disney on breaks
Think about hotel rates for Disney on breaks. Now think about rates in the fall. Do the same for a ski resort in February and in the summer.

4. Law of Supply: Price & Quantity have a Direct Relationship
THE HIGHER THE PRICE, THE GREATER THE QUANTITY PRODUCED
P QS
Price & Quantity have a Direct Relationship
Prices send signals and provide incentives
AS PRICE RISES, FIRMS WILL TRY TO PRODUCE MORE IN ORDER TO EARN ADDITIONAL REVENUE TO COVER THEIR PRODUCTION COSTS. IF A FIRM IS ALREADY PROFITING, THEN AN INCREASE IN PRICE = AN INCREASE IN PROFITS

5. Law of Supply If price goes down, opposite would be true
Producers will offer more of a good as its price goes up.
(Firms will raise their level of production)
Depends on their ability to raise or lower output
New firms will enter the market
If price goes down, opposite would be true
Price
As price increases…
Supply
Quantity supplied increases
Price
As price falls…
Supply
Quantity supplied falls
PRICE UP=RECOGNIZE CHANCE TO MAKE MORE $, SO WILL WORK HARDER. PRICE DOWN=DISCOURAGED FROM PRODUCING AS MUCH BEFORE

6. Supply Curve:
The supply curve- model that shows relationship between the price of an item and the quantity supplied.
Price
Quantity
SEEMS COUTERINTUITIVE THAT PRODUCERS WILL OFFER MORE OF A GOOD AS ITS PRICE GOES UP BUKT CAN BE CONE IF THEY’RE ABLE TO RAISE OUTPUT

7. What Determines Supply? (SUPPLY SHIFTERS!)
Cost of Inputs/Resources – MOST IMPORTANT!
Changes in Cost of Production/ Natural Disaster
Outsourcing
Technology
Number of Producers (Other Sellers in market)
Government Influence
Taxes, Subsidies, & Environmental Regulation
Producer Expectations / Future Price Expectations (Short Run & Long Run Costs)
ALWAYS THINKING OF/SEARCHING FOR MAX PROFIT! WHAT’S THE LOWEST AMOUNT OF $ I WOULD ACCEPT FOR PROVIDING A GOOD/SERVICE? HOW MANY RESOURCES WILL BE SUPPLIED AT EACH PRICE?

8. HURRICANE IRMA MIGHT THE END OF ORANGE JUICE https://www

9. OUTSOURCING A DATE

11. TECHNOLGY- IMPROVEMENT INCREASES SUPPLY-SHIFTS TO THE RIGHT!
Ford opened Model T plant in 1913, produced one Model T every 93 minutes, remarkable reduction from 728 minutes
1927, one automobile every 24 seconds.
In part because of efficiency, Model T's price dropped from $1,000 (1908) to under $300 (1927).

13. Uncle Sam and Supply
By raising or lowering the cost of producing goods, the govt. encourages or discourages an entrepreneur or industry with:
Subsidy
Regulation
Taxes

14. Govt. Influence: Subsidies
SUBSIDY- benefit given by the govt. to groups or individuals, usually as a cash payment or tax reduction.
This causes supply to increase
Typically given to remove some type of burden, & often considered to be in overall interest of the public.
Subsidies in 1 Minute
Stossel_Farm Subsidies

15. Regulations
The govt. steps into a market to affect the price, quantity, or quality of a good.
Usually raises costs.
Safety Regulations
Environmental Laws

18. Excise Tax: Two major uses: To discourage the use of a good
To help maintain competition in domestic industries

20. Number of Suppliers:
If more firms enter a market, the market supply of goods will rise.
Wegman’s
Tops
Hart’s
Trader Joe’s
Aldi
Room for Whole Foods?
If firms leave the market, supply will decrease.

23. Was there ever a time that you didn’t buy a certain good because you knew the technology would soon be outdated?

25. Producer Expectations
Changes in producers' expectations about the future can cause a change in the current supply of products.

26. Future Expectations of Prices:
Expectations of higher prices will reduce supply now and increase supply later.
Expectations of lower prices will have the opposite effect.

27. Elasticity of Supply:
Measure of how firms will respond to changes in price of a good in terms of production (QUANTITY SUPPLIED)
Unresponsive to Change = Inelastic
(Supply DOESN’T change)
Responsive to Change = Elastic
(Supply WILL change)

28. Elasticity of Supply Elasticity of Supply: a measure of the way
If supply is not responsive to a change in price, it is inelastic (<1)
If supply is very sensitive to change, it is elastic (>1)
When percent change in supply is equal to percent change in price, it is unitary elastic (1)

29. Supply depends on time frame
If apple prices go up, what should apple orchard owners do?
WE KNOW:
Apple trees take a long time to grow
It would take years to grow more trees
Also hard for new farmers to enter the market
SO:
Short run: supply is inelastic
Long run: (not a set period of time): supply is elastic
Plant more trees, hire more workers
Firm has enough time to alter all of its fixed costs

30. Elastic
Supply sensitive to a change in price
Supply
Price
Qty

31. Inelastic
Supply insensitive to a change in price
Supply
Price
Qty

32. Perfect Inelasticity Here, elasticity of supply equals 0
Supply is fixed
Land
Others?
Supply
Price
Qty

33. Changes in Cost affect Supply:
Any change in input costs, such as raw materials, machinery, or labor, will affect supply.

34. Changes in Cost affect Supply
As input costs increase, supply will decrease

35. Changes in Cost affect Supply
New technology can greatly decrease costs and increase supply.

36. The Global Economy:
The supply of imported goods & services has an impact on supply of the same goods and services here.
Govt. import restrictions cause a decrease in the supply of restricted goods.