1.  How do businesses know how much to supply?  And at what prices? STARTER

2. CHAPTER 5.1, 5.2, 5.3, 5.4 SUPPLY

3.  Supply--willingness and ability of producers to offer goods, services  Anyone who provides goods or services is a producer  Law of supply: producers willing to sell more of product at higher price than at lower price WHAT IS SUPPLY?

4.  Supply schedule shows  amount of product individual willing, able to offer at each price SUPPLY SCHEDULES

5.  Supply curve shows data from supply schedule in graph form SUPPLY CURVES

6.  Marginal product- change in total output caused by adding one more worker  Marginal Product schedule- relation between labor and marginal product  Increasing returns- new workers cause marginal product to increase  Diminishing returns- total output grows at a decreasing rate  Negative returns- output decreases through crowding, disorganization MARGINAL PRODUCT

7.  Fixed costs- expenses owners incur no matter how much they produce (mortgage, insurance, etc.)  Variable costs- expenses that vary as level output changes (wages, materials, electricity, etc.)  Total cost- the sum of fixed and variable costs  Marginal cost- additional cost of making one more unit of product PRODUCTION COSTS

8.  Brainstorm examples of factors that can cause prices and supply levels to change. STARTER

9.  Marginal revenue- money made from sale of each additional unit sold  Total revenue- income from selling a product  Marginal analysis- comparison of costs, benefits of adding a worker, making another unit  Profit-maximizing output- level of production yielding highest profit EARNING THE HIGHEST PROFIT

10.  Change in quantity supplied- rise or fall in amount offered for sale because of change in price  Change in quantity supplied does not shift the supply curve  movement to right means increase in price and quantity supplied  movement to left means decrease in price and quantity supplied CHANGES IN QUANTITY SUPPLIED

11.  Change in supply- producers offer different amounts at every price  As production costs rise, supply drops; as costs drop, supply rises  Six factors can cause change in supply:  Input costs  Labor productivity  Technology  Government Action  Producer Expectations  Number of producers CHANGES IN SUPPLY

12.  Input costs--price of resources needed to produce good or service  if price of resource increases, costs increase  if price of resource decreases, costs decrease  Labor productivity--amount of product worker can produce in set time  Rise in productivity lowers production costs; supply increases  Specialization can allow producer to make more goods at lower cost  Better-trained workers produce more in less time; decrease costs  Technology  Manufacturers use technology to make goods more efficiently  Technology enables workers to be more productive  Results in new products or manufacturing techniques  Manufacturers use technology to make goods more efficiently  Technology enables workers to be more productive SIX FACTORS THAT CAUSE CHANGE IN SUPPLY

13.  Government action  Excise tax--tax on production or sale of specific good or service  often placed on items that government wants to discourage use of - taxes increase producers' costs; decrease supply  Regulation--set of rules, laws designed to control business behavior - examples: banning use of certain resources, worker safety laws  Producer expectations  Producers have expectations about future price of their product  Expectations of price affect how much they will supply at present  Number of producers  When one producer has successful new idea, others enter the market  supply of good or service increases  Increase in number of producers leads to increased competition  May drive less-efficient producers out of market SIX FACTORS THAT CAUSE CHANGE IN SUPPLY

14.  Elasticity of supply--measures producer response to price changes  Elastic--price change leads to larger change in quantity supplied  Inelastic--price change leads to smaller change in quantity supplied  Unit elastic--price and quantity supplied change by same percentage  Main factor determining elasticity is ease of changing production  given enough time, elasticity rises for most goods and services  Industries that respond quickly to rising or falling prices:  do not need much capital, skilled labor, hard-to-obtain resources  Other industries need a lot of time to shift resources ELASTICITY OF SUPPLY