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. Law of Supply
Producers will offer more of a good as its price goes up.
(Individual 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

3. 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

4. Supply: the amount of goods available
Quantity Supplied - the amount that producers wish to sell at a specific price.
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

5. Elasticity of Supply:
A measure of how quantity supplied reacts to a change in price
unresponsive to change in price=inelastic (<1)
very sensitive to change=elastic (>1)
When % change in supply is equal to % change in price, it is unitary elastic (1)

6. Elasticity of Supply: INELASTIC SUPPLY-
Difficulty increasing supply in response to a rise in price.
Nuclear power plants
Homes in highly developed area
ELASTIC SUPPLY- increase in price causes a bigger % change in supply.
Can easily increase supply in response to rise in price.
Firms operating below full capacity. Barbers can hire more workers if price of haircuts increases

7. Elastic: Supply sensitive to a change in price
If price of an oil change increases, repair shop owner could hire more workers & increase supply of oil changes
Supply
Price
Qty

8. Inelastic: Supply insensitive to a change in price
Tickets to a NFL football game
Stadium owners can’t increase supply of seats greatly in short term
Supply
Price
Qty

9. Perfect Inelasticity:
Here the price of a product will have no effect on the supply
Elasticity is equal to zero
Quantity is essentially fixed
Land
Supply
Price
Qty

10. What Determines Supply? (SUPPLY SHIFTERS!)
Cost of Inputs/Resources – most important!)
Changes in Cost of Production/ Natural Disaster
Outsourcing
Technology
Number of Producers/Suppliers (Other Sellers)
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?

11. Changes in Cost affect Supply:
Any change in cost of an input such as the raw materials, machinery, or labor used to produce a good, will affect supply.

12. Changes in Cost affect Supply
As input costs increase, the firm’s marginal costs also increase, decreasing profitability and supply.

13. Changes in Cost affect Supply
Input costs can also decrease. New technology can greatly decrease costs and increase supply.

14. http://www. criticalcommons

16. 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).

18. Number of Suppliers:
If more firms enter a market, the market supply of goods will increase
Wegman’s, Tops
Hart’s
Trader Joe’s
Aldi
If firms leave the market, supply will decrease.

19. Govt. Interventions & Supply:
By raising or lowering the cost of producing goods, the govt. can encourage or discourage an entrepreneur or industry from producing with :
Subsidies
Taxes
Regulation

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

21. Taxes:
The govt. can reduce the supply of some goods by placing an excise tax on them.
excise tax -tax on the production or sale of a good.

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

23. Example - Cigarettes

24. Regulation
The govt. steps into a market to affect the price, quantity, or quality of a good.
Usually raises costs.

25. Regulations
Government intervention in a market through indirect means.
Safety Regulations
Environmental Laws

28. What would the effect of a frost be on the orange juice market in both the short & long term?
COST OF PRIODUCTION INFLUENCED BY RESOURCE AVAILABILTY

29. Producer Expectations
Changes in producers' expectations about the future can cause a change in the current supply of products.
market-forces

30. Supply depends on time frame
If apple prices go up, what can apple orchard owners do short run?
Apple trees take a long time to grow
Hard for new farmers to enter market
Short run: Supply is inelastic
BUT OVER TIME...
Could plant more trees, hire more workers
Firm has enough time to alter all of its fixed costs
Long run: (not a set period of time): supply is elastic

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

33. The Global Economy:
The supply of imported goods & services are affected by changes in other countries
Govt. import restrictions cause a decrease in the supply of restricted goods.