2. Production Cost Graph: A Shirt Factory

5. Part F: Section 5.3 Outline: Read pages 116-120) “Changes in Supply”

6. A. Input Costs: Costs needed to produce a good: raw materials machinery, and labor

7. Increased prices of inputs will cause a fall in supply and a shift to the left Increased prices of inputs will cause a fall in supply and a shift to the left

8. Decreased prices of inputs will cause a rise in supply and a shift to the right Decreased prices of inputs will cause a rise in supply and a shift to the right

9. 1. Effects of Rising Cost: supply curve shifts to the left (1) Increased Prices in Outputs (1) Increased Prices in Outputs (3) Producers decrease supply so that price equals marginal cost (1) Increased Prices in Inputs (2) Increased Marginal Cost

10. Technology: Advances in technology lowers costs and increases supply

11. B. Government’s Influence on Supply 1 Subsides: government pays a producer a set subsidy for each unit of a good produced

12. a. Why subsidize? (1) To protect the food supply in case imports are cut off (2) To protect a lifestyle (3) To protect growing industries and struggling industries

13. b. By lowering marginal cost at all levels of output, subsidies allow the supply of a good to increase. The supply curve shifts to the right.

14. 2. Taxes: Excise taxes a. Excise tax: Increases production costs by adding an extra cost for each unit sold

15. b. Why apply an excise tax? (1) discourage harmful goods: cigarettes, alcohol, and high pollutant gasoline c. Causes supply levels to decrease and the supply curve to shift to the left.

16. 3. Regulation: often has the effect of raising cost a. Example of regulation: pollution control: producers are required to install technology that reduces pollution b. The supply curve shifts to the left

17. C. Supply in the Global Economy 1. Imports may cause an increase in supply when input costs decrease 1. Imports may cause an increase in supply when input costs decrease a. example: The U.S. imports telephones from Japan: a Japanese technological innovation decreases the cost of producing telephones an increase supply of telephones in the U.S occurs

18. 2. Import restrictions: cause a decrease in supply a. example: quota systems and tariffs: limits imports in a country b. quota systems: when governments limit the amount of imports from another country c. tariffs: taxes on imported goods

19. Quota systems: governments allowing only a certain amount of goods to enter a country Quota systems: governments allowing only a certain amount of goods to enter a country Tariffs: tax on imported goods Tariffs: tax on imported goods

20. D. Other influences on Supply 1. Future expectations a. If a producer believes that the price of a product will increase in the future what will a producer do? (1)The producer will decrease. supply until the price increases.

21. b. If a producer believes that the price of a product will decrease in the near future what will a producer do? (1) The producer will immediately place more goods on the market.

22. 2. Inflation: When inflation occurs, producers decrease their supply so they can gain more money in the future a. example: The South during The Civil War b. inflation: a general rise in prices

23. 3. The Number of suppliers : More suppliers will cause an increase in supply and fewer suppliers will cause a decrease in supply

24. Complete Part G in your Chapter 5 Packet

25. The Wal-Mart Telxon

26. Eminent domain, local merchants and Wal-mart