1. Chapter 5
Supply

2. Law of Supply
Because the producer is receiving payment more will be offered at higher prices.
Suppliers will normally offer more for sale at high prices and less at lower prices.

3. The Supply Schedule
The only real difference between a supply schedule and a demand schedule is that prices and quantities now move in the same direction for supply
can also be illustrated graphically as an upward-sloping line

5. Change in Quantity Supplied
Suppliers have some control over the price
Ultimately the final interaction between supply and demand determines the price.
Again if the price changes then it is a movement along the supply curve.

6. Change in Supply Appears as a SHIFT in the Supply curve.
Decrease in Supply – Shift to the Left
Increase in Supply – Shift to the Right

7. Cost of Inputs
A change in the cost of inputs can cause a change in supply
If the price of the inputs drops, producers are willing to produce more at each price

8. Productivity
If workers work more efficiently, productivity should increase
The result is more is produced at every price
supply shifts right
if workers are unmotivated, untrained, or unhappy, productivity could decrease
Supply shifts left

9. Technology New technology tends to shift the supply curve to the right
New Technology can affect supply by lowering the cost of production or by increasing productivity

10. Taxes and Subsidies Firms view taxes as costs
If the producer’s inventory is taxed or if fees are paid the cost of production goes up.
Taxes shift supply left

11. Taxes and Subsidies
A subsidy is a government payment to encourage or protect a certain type of economic activity
Subsidies lower the cost of production
Subsidies shift supply right

12. Expectations
Expectations about the future price can affect the supply curve
If producers think the price of their product will go up, they may withhold some of the supply
If producers may expect lower prices they may try to produce and sell as much as possible right away

13. Government Regulations
When the government establishes new regulations, the cost of production can be affected
Increased government regulations restrict supply
supply curve to shifts to the left
Relaxed regulations allow producers to lower the cost of production
Shift to the right

14. Elasticity of Supply
If a small increase in price leads to a large increase in output, supply is elastic.
If the quantity supplied changes very little, supply is inelastic

15. Determinants of Supply Elasticity
If a firm can adjust to new prices quickly, then supply is likely to be elastic.
If adjustments take longer, then supply is likely to be inelastic.

16. Theory of production
The relationship between the factors of production and the output of goods and services.
Short run vs Long run
Some things take longer to change and can only be changed in the long run.

17. Short run vs Long run
Short run – only the variable inputs can be changed
Long run – any input, fixed or variable, can be changed
hiring 300 extra workers is a short-run adjustment
building a new factory, this is a long-run adjustment

19. Stage 1 - Increasing
With only a couple of workers not all resources are used
Some machines are idle
Each extra worker adds more than the previous

20. Stage 1 - Increasing Workers begin to specialize and work as a unit
This stage is characterized by increasing marginal returns

21. Stage 2 - Decreasing Eventually the plant is at full employment
All resources are maximized
Adding more workers still increases production
But each work adds less than the previous
This is called decreasing marginal production

22. Stage 3 - Negative Finally there are just too many workers
They get in the way and slow down production
Each worker actually subtracts from total production
This is call negative marginal product