2. Aim: What is the nature of supply? Do Now: Imagine you own a pizzeria and the price you are able to sell your slices for has just gone up. You can now earn $2 a slice! How will you adjust your quantity supplied in order to create a great profit? HW: Chapter five Section 3, Read 116-120. Copy and answer questions 1-3 pg 120.

3. Supply and Quantity Supplied Supply the amount of a good or service that producers are willing and able to offer for sale at all possible prices during a period of time, all else constant. (THE ENTIRE CURVE) The quantity supplied is the amount sellers are willing and able to offer for sale during a period of time at a specific price, all else constant. A change in the Quantity supplied is a movement along the supply curve.

4. LAW OF SUPPLY The quantity of a well-defined good or service that producers are willing and able to offer for sale during a particular period of time increases as the price of the good or service increases and decreases as the price decreases, everything else held constant. (Direct relationship) As Price Rises… …Quantity Supplied Rises As Price Falls… …Quantity Supplied Falls Why do you think that is?

5. Representations of Supply Supply Schedule: A table or list of the prices and corresponding quantities supplied of a particular good or service. It is the price-quantity relationship presented in tabular form. Supply Curve: A graph of the supply schedule with price on the vertical axis and quantity demanded on the horizontal axis.

6. Supply Schedule and Supply Curve for DVDs

7. Market Supply Curve Individual supply Curve: represents the price- quantity combinations for a single seller-like the one we just saw for CDs Market Supply Curve: represents the price- quantity combinations for all sellers of a particular good. (for the whole market)

8. Deriving a Market Supply Schedule and a Market Supply Curve

9. Create your own supply schedule and graph! Imagine you are a supplier of an item (you choose) First create a table with price in the left column, and quantity supplied in the right column. Then create a graph.

10. 5 P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY I am a supplier of Corn!

11. P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

12. 35 P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

13. P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

14. Discussion: What does a supply curve look like? Why? What is the relationship between price and quantity supplied? How is this different than the relationship between price and quantity demanded?

15. Let’s Compare the two curves!

16. Aim: What are the factors that influence a change in supply? HW Chapter 6-1; Read 125-131. Copy and answer 1-2 pg 131. Test Wed Read 134-136. Do Now: You are a pizzeria owner (again)…You sell your pizza for $2 a slice, and you like to produce fifty slices a day. What are some factors that might decrease your supply curve? Increase in the price of ingredients. So when you increase the cost of production- costs more to produce, that will decrease the supply curve….

17. Changes in Supply Change in Quantity Supplied - movement along the same supply curve in response to a price change. Change in Supply - shift in entire supply curve.

18. S P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN What if Supply Increases? GRAPHING SUPPLY

19. S P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 Price of Corn Quantity of Corn $5 4 3 2 1 60 50 35 20 5 PQSQS CORN 80 70 60 45 30 S’ Increase in Supply Increase in Quantity Supplied GRAPHING SUPPLY

20. S P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN What if Supply Decreases? GRAPHING SUPPLY

21. S P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN S’ 45 30 20 0 -- Decrease in Supply Decrease in Quantity Supplied GRAPHING SUPPLY

22. Supply Curves When There is No Time to Produce More or No More Can Be Produced

23. Factors Which Can Shift the Supply Curve Taxes and Subsidies

24. DETERMINANTS OF SUPPLY Resource Prices - –a rise in resource prices will cause a decrease in supply or leftward shift in supply –A decrease in resource prices will cause an increase in supply or rightward shift in the supply curve

25. DETERMINANTS OF SUPPLY Technology - a technological improvement (techniques of production) enable firms to produce units of output with fewer resources. (i.e computers)- will adjust supply curve to the right. Taxes & Subsidies - A business tax is treated as a cost, so decreases supply curve. Taxes on an item will adjust the supply curve to the left.

26. Government Subsidies Sometimes the government SUBSIDIZES a business or market. The producer gets paid to produce. What are some reasons why the government may have to subsidize? During wartimes if there is a shortage, we subsidize alternate energy to help the pollution problem…. How do subsidies affect the supply curve- shift to the right-more supply

27. SUBSIDIES CONTINUED SUBSIDIES LEAD TO AN INCREASE IN THE SUPPLY CURVE BECAUSE THEY DECREASE THE COST OF THE PRODUCTION

28. GOVERNMENT REGULATION Government regulation often increases the cost of production, thereby decreasing supply. Examples of government regulation: –Environmental requirements Can we think of other forms of regulation that would increase production costs? Minimum wage Supply curve will move to the left.

29. DETERMINANTS OF SUPPLY Price Expectations - expectations about the future price of a product can influence producers to increase or decrease current supply.

30. Future Expectation Say you expect that the price of pizza is going to rise next week. You would move supply to the left currently (then to the right later)

31. Global Economy Because we import goods, often additional costs are added. AN increase in the wages of a Chinese worker would increase production costs of that item thereby decreasing the supply to the American market. The curve moves to the left.

32. DETERMINANTS OF SUPPLY Number of Sellers – the larger the number of suppliers, the greater the market supply Prices of Related Goods - if the price of substitute production good rises, producers might shift production toward the higher- priced good, causing a decrease in supply of the original good.

33. Final DIscussion What are the factors that alter the supply curve? Say the cost of cheese went up and you are the pizza maker. Draw your original supply curve S1, the draw what your second supply curve S2 would be. Which direction did your curve move?

34. DETERMINANTS OF SUPPLY Resource Prices Technology Taxes & Subsidies Prices of Other Goods Price Expectations Number of Sellers Combining with Demand

35. Aim: How do supply and demand create a balance in the market? HW chapter 6 sec 2- Read 133-137. Complete #3 pg 137 Do Now: What happens when the quantity supplied equals the quantity demanded? What is that called?

36. Equilibrium Equilibrium is the price and quantity at which the quantity supplied and the quantity demanded are equal. A market is said to be in disequilibrium at all points at which the quantities demanded and supplied are not equal. –A surplus occurs whenever Supply>Demand. –A shortage occurs whenever Demand>Supply. –Surpluses and shortages can be resolved with price changes which lead to adjustments in.

37. Let’s Compare the two curves! When Supply is greater than demand=Surplus When demand is greater than supply=shortage

38. 7 S P Q o $5 4 3 2 1 2 4 6 8 10 12 14 16 PQDQD $5 4 3 2 1 2,000 4,000 7,000 11,000 16,000 $5 4 3 2 1 12,000 10,000 7,000 4,000 1,000 D PQSQS Price of Corn Quantity of Corn CORN MARKET CORN MARKET Market Clearing Equilibrium MARKET DEMAND & SUPPLY at EQUILIBRIUM Supply and Demand Intersect Market Price

39. 7 S P Q o $5 4 3 2 1 2 4 6 8 10 12 14 16 PQDQD $5 4 3 2 1 2,000 4,000 7,000 11,000 16,000 $5 4 3 2 1 12,000 10,000 7,000 4,000 1,000 D PQSQS Price of Corn Quantity of Corn CORN MARKET CORN MARKET Surplus At a $4 price more is being supplied than demanded MARKET DEMAND & SUPPLY Disequilibrium At which price will there be an equilibrium?

40. 11 7 S P Q o $5 4 3 2 1 2 4 6 8 10 12 14 16 PQDQD $5 4 3 2 1 2,000 4,000 7,000 11,000 16,000 $5 4 3 2 1 12,000 10,000 7,000 4,000 1,000 D PQSQS Price of Corn Quantity of Corn CORN MARKET CORN MARKET At a $2 price more is being demanded than supplied Shortage MARKET DEMAND & SUPPLY

41. 11 7 S P Q o $5 4 3 2 1 2 4 6 8 10 12 14 16 PQDQD $5 4 3 2 1 2,000 4,000 7,000 11,000 16,000 $5 4 3 2 1 12,000 10,000 7,000 4,000 1,000 D PQSQS Price of Corn Quantity of Corn CORN MARKET CORN MARKET Shortage MARKET DEMAND & SUPPLY Surplus By Changing price we move to equilibrium!

42. Equilibrium (Table)-Fill in the Status as Surplus or Equilibrium Price Per DVD Quantity Demanded Quantity Supplied Status- Surplus/Equilibrium Price Change $530102Price Falls $44884Price Falls $366 No Change $28448Price Rises $110230Price Rises

43. The Answers Price Per DVD Quantity Demanded Quantity Supplied Status- Surplus/Equilibrium Price Change $530102SurplusPrice Falls $44884SurplusPrice Falls $366 EQUILIBRIUMNo Change $28448ShortagePrice Rises $110230ShortagePrice Rises

44. Shifts in Supply Since Market Equilibrium occurs at the intersection of the demand and supply curve-a shift of the entire supply curve will change the equilibrium price. A change in supply (either to the left or right) will set the market in motion to form a new equilibrium-a new price and quantity sold.

45. Price Floors and Ceilings Price Floor: price is not allowed to decrease below a certain level. Examples: minimum wage, agricultural price supports. Price Ceiling: price is not allowed to increase above a certain level. Example: rent controls.

46. Example of how a supply shift shifts price. Pgs 134-135 An Increase in technology has decreased the cost of production for CD players overtime. Producers can produce more CD players- increasing the supply curve. Say they went from offering 2 million cd players to 4 million cd players- But the demand is still at 2 million. The suppliers now have to lower their prices to reach a new equilibrium-this will increase the demand (a decrease in price increases demand) to meet the supply= new equilibrium.

47. $ S1 S2 D

48. Impact of Increase Demand If the demand curve shifts to the right causing an increase in demand (shortage), prices will rise to meet a new equilibrium. Suppliers will raise prices-and an increase in prices will increase the supply- Meeting at a new equilibrium!

49. D1 d2 S

50. 1)An excess in supply is called a_______ 2)When supply does not meet demand it is called a _______ 3)If Supply curve increases, suppliers will have to ______ their prices which leads to a ______ in quantity demanded. 4)If Demand increaes, the prices will_______ and eventually quantity supplied will ________ to meet a new equilibrium Final Discussion

51. Rent Controls

52. A Price Floor