Presentation on theme: "Chapter 5 Section 3 What factors affect supply?"— Presentation transcript:
1 Chapter 5 Section 3 What factors affect supply? EconomicsChapter 5 Section 3 What factors affect supply?
2 Changes in Quantity Supplied Changes Along a Supply CurveChange in quantity supplied does not shift the supply curvemovement to right means increase in price and quantity suppliedmovement to left means decrease in price and quantity suppliedMarket supply curves show larger changes than individual curves
3 Changes in quantity supplied do not shift the position of the supply curve. Why?
4 Changes in SupplyChange in supply—producers offer different amounts at every priceAs production costs rise, supply drops; as costs drop, supply risesChange in supply shifts the supply curveSix factors cause change in supply
5 Changes in Supply Factor 1: Input Costs Input costs—price of resources needed to produce good or serviceif price of resource increases, costs increaseif price of resource decreases, costs decrease
6 Changes in Supply Factor 2: Labor Productivity Labor productivity—amount of product worker can produce in set timeRise in productivity lowers production costs; supply increasesSpecialization can allow producer to make more goods at lower costBetter-trained workers produce more in less time; decrease costs
7 Changes in Supply Factor 3: Technology Technology—use of scientific methods, discoveries in productionresults in new products or manufacturing techniquesManufacturers use technology to make goods more efficientlyTechnology enables workers to be more productive
8 Changes in Supply Factor 4: Government Action Excise tax—tax on production or sale of specific good or serviceoften placed on items that government wants to discourage use oftaxes increase producers’ costs; decrease supplyRegulation—set of rules, laws designed to control business behaviorexamples: banning use of certain resources, worker safety laws
9 Changes in Supply Factor 5: Producer Expectations Producers have expectations about future price of their productexpectations affect how much they will supply at presentExpectations of higher price in future may lead to different actionsFarmer may withhold part of current crop and decrease supplyManufacturer may buy more equipment to increase future supply
10 Changes in Supply Factor 6: Number of Producers When one producer has successful new idea, others enter the marketsupply of good or service increasesIncrease in number of producers leads to increased competitionmay drive less-efficient producers out of market
11 Questions Complete the chart below. Factor That Changes SupplyReason Why Supply Changes
12 QuestionsHow do each of these examples of government actions affect the supply of gasoline?a. In 2005, the government continued support for ethanol, a gasoline substitute.b. The state of California requires a special blend of gasoline that meets stricter environmental standards than other regions in the country.c. Many state use gasoline taxes to help fund highway construction and maintenance.
13 QuestionsWhy do you think governments want to influence the supply of alcohol and tobacco products by imposing excise taxes?
14 Questions Complete the chart below for a manufacturer of MP3 players. Example Change That Affects SupplyFactor and How It Affected SupplyYou give each worker in your factory a specialized jobPrice of computer chips used in MP3 players risesNew machinery speeds up the manufacturing processYour success prompts three new companies to start producing MP3 playersA new law requires producers to recycle the wastewater from their factories.