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CHAPTER 5 THE SUPPLY CHAPTER 5.1 What is supply?.

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Presentation on theme: "CHAPTER 5 THE SUPPLY CHAPTER 5.1 What is supply?."— Presentation transcript:

1 CHAPTER 5 THE SUPPLY CHAPTER 5.1 What is supply?

2 2 CurvesSupply & Demand: Which one is which?

3 Why does supply increase as price increases? Lets think about it. If you could tutor a kid after school, would you do it for… $1/hr? $5/hr? $7.50/hr $10/hr? $20/hr? If yes, is this price high enough where you would be willing to work more than 1 hr/week? How about 5 hours at this price? Or 20 hours? $30/hr? $50/hr? $100/hr? $250/hr?

4 Duh The supply of students willing to stay after school for $250/hr is much greater than the supply willing to stay for $1/hr

5 Does supply apply only to labor? In other words, as the price increases, would the production of GOODS also increase? Personal Examples SUPPLY SCHEDULE OR SUPPLY CURVE?

6 Classwork Ch. 5.1 Definition Subsidy Identify and briefly describe the 7 reasons why changes in supply occur (p ).

7 What would cause THIS to happen?

8 Reasons for Change in Supply? Cost of Inputs Productivity Technology Taxes and Subsidies Expectations Government Regulations Number of Sellers

9 Supply Elasticity If a small increase in price leads to a relatively larger increase in output, supply is ____________. ELASTIC INELASTIC

10 Difference between demand & supply elasticity? Not much D.E. – quantities are being purchased S.E.– quantities are brought to market for sale Dont forget: Elasticity is simply a measure of the way quantity adjusts to a change in price.

11 I need a… Explain why the first is inelastic and the second is elastic.

12 Tickle Me Economics Dec. 1996: Tickle Me Elmo was the hottest toy of the season Regular price--$23.99; Advertised in newspapers for as much as $500 Did the company want to supply more? Since manufacturing could not keep up with the demand, there was a temporary ____________ of supply. INELASTICITY

13 The supply curve for products that can be made quickly without huge amount of capital and skilled labor is ________. ELASTIC Kites, candy, etc. INELASTIC Planes, shale oil ***Unlike demand, ONLY production considerations determine supply elasticity.*** (Substitutes, ability to delay purchase, etc. are not important for supply elasticity)

14 Finally (for this section)… Unit Elastic Supply KEY WORD: PROPORTIONAL (change)


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