1. Warm-up Question:
What is the goal of the Nike Corporation (or any other business for that matter)?

2. Profit….Profit…Profit
How does Nike maximize their profits?
2010, $130.00
Make more shoes & increase the price!!
1985, $64.99
As the price of the shoe increases the quantity made by Nike increases.
= Law of Supply

3. Economics Unit 9: Supply
Chapter 21

4. I. Introduction to Supply
A. Supply refers to the quantities of a goods or services that producers are willing to sell at all possible market prices.
B. Producers offer different quantities of a product depending on the price that buyers are willing to pay.

5. I. Introduction to Supply
C. The law of supply holds that producers will sell more stuff for a higher price
1. Higher prices mean higher profits for producers.
2. Higher profits are an incentive to produce more.

6. II. Supply Schedule/ Curve
A supply schedule is a table that shows the quantities producers are willing to supply at various prices. (notice its opposite of the demand schedule)
A supply schedule shown as a graph is a supply curve.
1. In the graph, prices are listed on the vertical axis and quantities on the horizontal axis.
Price per Frosty
Quantity Supplied per day 2 18
1.50 16 1 13
.50 10
.25 6

7. II. Supply Schedule/ Curve
Price S $7 $3 13 20
Quantity Supplied

8. II. Supply Schedule/ Curve
A. Unlike a demand curve, a supply curve normally slopes upward.
B. Businesses provide goods and services hoping to make a profit.
1. Profit is the money a business makes after costs are paid
2. Businesses will inflate the prices to
Cover costs
Make profit

9. III. Changes in Supply
A. A change in supply occurs when producers offer a different quantity of output at each possible price.
B. When supply goes down, the supply curve shifts to the left (inward).
C. When supply goes up, the supply curve shifts to the right (outward).

10. III. Changes in Supply P Q Increase in Supply (Outward Shift) S1 S2 $313 18 Q

11. III. Changes in Supply Decrease in Supply (Inward Shift) P S3 S1 $3 913 Q

12. III. Changes in Supply D. Determinants of Supply
1. Businesses use the 4 factors of production to produce goods and services.
a. When prices of these resources fall, cost of production fall. Producers are then willing and able to offer more of the product for sale at each price. The supply curve shifts to the right.
b. When prices of resources rise, production costs rise. Producers are then willing and able to offer less of the product for sale at each price. The supply curve shifts to the left.

13. III. Changes in Supply
2. Productivity is the degree to which resources are being used efficiently to produce goods and services.
a. Workers are more efficient when they produce more output in the same amount of time.
Decrease costs
Increase supply
b. When productivity falls
Costs go up
Decreases supply

14. III. Changes in Supply
3. Technology refers to the methods or processes used to make goods or services.
a. New technology can speed up ways of doing things, which can cut a business’s costs.
b. This pushes the supply curve to the right

15. III. Changes in Supply
4. Government actions can affect the cost of production, causing a change in supply.
a. Gov’t Regulations
Strict Regulations = Less Supply
Less regulation = More supply
b. Taxes
Higher Taxes = Less Supply
Lower Taxes = More Supply

16. III. Changes in Supply
c. A subsidy is a government payment (free money) to an individual, business, or other group for certain actions.
i. A subsidy paid to a producer lowers the cost of production, thus increasing supply
ii. When subsidies are repealed, costs go up, producers leave the market, and the supply curve shifts to the left.

17. III. Changes in Supply 5. Producers’ expectations also affect supply.
a. If they expect strong consumer demand/ higher price, they will produce more.
b. If they expect weak demand/ lower price, they will produce less.

18. III. Changes in Supply
6. A change in the number of suppliers causes a change in market supply.
a. More Supplier = Increase Supply
b. Less Suppliers = Less Supply

19. III. Changes in Supply
7. Other Goods that producers might produce instead
a. price of other goods goes up, producer will switch production to other good, and supply will decrease
b. price of other goods goes down, producer will switch production to this good, and supply will increase

20. STONER: Factors that Shift Supply
Subsidies and Taxes
Technological Progress
Other Goods (prices of goods that producers might produce)
Number of Sellers
Expectations (of relevant future prices)
Resource Costs (prices of inputs )

21. Decrease Increase Right Left Cost to Produce Amount of Supply
Supply Curve Shift
Cost of Resources
Decrease
Increase
Right
Left
Productivity
New Technology
Higher Taxes
Lower Taxes
Government Pays Subsidy
Cost of Resources