1. Agenda- 11/2 Current Events Discuss Demand Quiz
Begin Ch. 5 Lecture (RS)
Ch. 5 Sec. 1 Book ?’s (LS)

2. Quiz review-Change in quantity demanded vs. change in demand
Which of the following choices could cause the movement shown in this graph? a.
An increase in the price of Blu-ray discs. b.
a decrease in the price of Blu-ray discs c.
an increase in the price of Blu-ray players d.
a decrease in the price of Blu-ray players

3. Or, when Producers control the market…
Ch. 5 - Supply
Or, when Producers control the market…

4. SUPPLY
Quantity supplied (Qs) is the amount of a good that sellers are willing and able to sell.
Law of Supply
The law of supply states that, other things equal, the quantity supplied of a good rises when the price of the good rises.
Direct relationship between price & quantity supplied.
P , Qs P , Qs 25

5. Supply Curve:
Supply Schedule: shows the quantity supplied at each given price.
Supply Curve: graphs the Supply Schedule (quantities supplied at each possible price.)
Relationship between quantity and price is direct and always moves in the same direction.

6. Supply Schedule/Curve

7. Graph of Supply S1
Price
Quantity Supplied

8. Ben’s Supply Schedule
Supplied 29

9. Figure 5 Ben’s Supply Schedule and Supply Curve
Price of
Ice-Cream
Supplied
Cone
$3.00
2.50
1. An
increase
in price
...
2.00
1.50
1.00
0.50 1 2 3 4 5 6 7 8 9 10 11 12
Quantity of
Ice-Cream Cones 2.
...
increases quantity of cones supplied.
Copyright©2003 Southwestern/Thomson Learning

10. Change in Quantity Supplied
Movement along the supply curve.
Caused by a change in anything that alters the quantity supplied at each price. 30

11. Change in Quantity Supplied
Price of Ice-Cream Cone S C
$3.00
A rise in the price of ice cream cones results in a movement along the supply curve. A
1.00
Quantity of Ice-Cream Cones 1 5 30

12. Homework Book Questions: P. 118 – “Economic Analysis”
P. 120 – “Reading Check” & “Economic Analysis”
P. 123 – “Reading Check”
P. 125 – “Reading Check”
P. 125 – “Main Idea” #2, 3, & 4
(Left-Side)

13. Agenda- 11/3 Continue Ch. 5 Lecture (RS) Whiteboards!
Supply Problems WS (LS)
Supply Headlines Packet (LS)

14. Left–side “Quick Write”:
What happens to the price of pumpkins after Halloween? Why?
Answer: The price of pumpkins falls because the supply exceeds demand.
Write down 5 other examples of situations or markets that are similar
Law of Supply

15. Market Supply
Market supply refers to the sum of all individual supplies for all sellers of a particular good or service.

16. Difference between Supply & Demand
Demand is Consumer driven. (What are people willing/able to buy?)
Supply is Producer driven. (What are people willing/able to produce?)
Demand Graph vs. Supply Graph

17. Shifts in the Supply Curve
Change in Supply
A shift in the supply curve, either to the left or right.
Caused by a change in a determinant other than price. 30

18. Figure 7 Shifts in the Supply Curve
Price of
Supply curve, S 3
Ice-Cream
curve,
Supply S 1
Cone
Supply
curve, S 2
Decrease
in supply
Increase
in supply
Quantity of
Ice-Cream Cones
Copyright©2003 Southwestern/Thomson Learning

19. Determinants of Supply
Cost of inputs
Number of sellers (market curve only)
(Competition)
Expectations
Taxes and subsidies / Govt. regulations
Technology / Productivity

20. Determinants of Supply:
Price of inputs : How much does it cost to make a product? An increase in an input will decrease supply
Think—What costs are involved in the production of the t-shirt you’re wearing?
Competition: the number of companies in an industry can cause an increase in supply. Companies exiting the market will decrease the supply
Think- What would happen to the supply of the Nintendo Wii if several companies got manufacturing rights? What would happen to the price?

21. Determinants cont.
Expectations: If a supplier anticipates an economic downturn, they will decrease supply (and vice-versa)
Govt. Regulation: an increase in taxes or decrease in subsidies can cause a decrease in supply (and vice-versa)
An improvement in technology / increased productivity can cause an increase in supply.
*** Not all technology improves productivity ; )
PLAY: Cheaper / Free not always better!
Part II

22. Table 2 Variables That Influence Sellers
Quick summary for thought (don’t write ; )
Copyright©2004 South-Western

23. Quantity supplied vs. supply:
A change in price causes a change in quantity supplied OR:
P = QS
Something other than price can cause a change in supply as a whole to increase or decrease.

24. Thought/Example:
(Read) When something other than price causes the supply to increase, what do you think happens to price?
Answer: The price will decrease because the supply will be too great.
Below is an example of what you will be sketching on tonight’s homework for the graph: s1 s2

25. Incentive of Greater Profits:
Increase in price and increase in production leads to an increase in profits.
P & Production = Profits
Higher prices encourage more competitors to join the market.
Higher prices encourage potential suppliers to turn into actual suppliers, adding to the total output.

26. Example/Thought:
Why do higher prices encourage more competitors to enter an industry? Think about it in terms of risk and profit.
Answer: If prices go up, possible competitors now see that there is more money to be made than before. The gain seems more worth the risk than before.

27. Whiteboards!!!

28. The price of wood drops by 50% – graph the change in Supply for boats made of wood.

29. Cost of Inputs S1 S2
Price
Quantity

30. The Federal Govt. adds a $2 tax per cigarette pack on the Producer – graph the change in Supply for cigarettes.

31. Taxes & Subsidies S2 S1
Price
Quantity

32. New technology allows shoe producers to cut costs by 20% – graph the change in Supply for shoes.

33. 2 reasons why – Change in technology & Increased Productivity
Price
Quantity

34. The Federal Govt. raise minimum wage by 20% – graph the change in Supply for any product.

35. 2 reasons why – Govt. regulation & cost of inputs
Price
Quantity

36. The Federal Govt. removes the requirement to get licensed to sell snow-cones ($100 cost) – graph the change in Supply of snow-cones.

37. 3 reasons why – cost of input, de-regulation, & change in # of competitors
Price
Quantity

38. Supply Summary Summary HW: Gold Supply Headline WS
White Supply Problems WS

39. Agenda- 11/6 Finish Supply Lecture
HW: - -Unit 2 Test and notebooks Friday

40. Law of Diminishing Marginal Returns:
Adding units of INPUT to increase production increases total output for a limited time period.
The extra output for each additional unit will eventually decrease.
Businesses will continue to add units of a factor of production until doing so no longer increases revenue.

41. Think about working on a project in groups in class
Think about working on a project in groups in class. How many students make up a productive team? When is adding more group members actually going to make your project worse?
Share you biggest “nightmare” of a group project with a neighbor.
Then “find” yourself in the picture on the next slide ; )

43. Three Stages of Production
Stage I: Increasing Returns (we are doing better and better with each worker added)
Stage II: Diminishing Returns (we are doing better and better with each worker added but the gains are starting to get smaller.
Stage III: Negative Returns (yikes, all these workers are making a mess!)

44. Total Product (TP): The total output the company produces (the “running” total)
Marginal Product (MP): The EXTRA output or change in total product caused by adding one more unit of variable input.

45. Short Run
This is the period of production that allow producers to change only the amount of variable inputs, usually labor.
Long Run
A period of production time long enough for all inputs, including land & capital, to vary.

46. Fixed Costs vs. Variable Costs
FC v. VC

47. Variable Costs – Those costs that are incurred with each unit produced
Fixed Costs – Those costs that are incurred no matter how many units are produced (“Overhead”)
Variable Costs – Those costs that are incurred with each unit produced
Total Cost = FC + VC
Diminishing Marginal Returns (+everything else ; )
*** Pause when he says “pause” to make and fill in the chart for MP.

48. Homework (left-side)
P #19 – 28
P #1 - 5