Supply and Determinants Q

Supply Producer’s side A relation between the price of a good and the quantity that the producers are willing and able to offer for sale during a given period, other things constant.

Law of Supply The quantity of a good supplied during a given period is usually directly related to the price of the good Increase in price leads to increase in quantity supplied Decrease in price leads to decrease in quantity supplied. Creates upward sloping supply curve

Supply Curve 5 Price of Good Quantity Demanded $3 50 $4 75 $5 100 $6 150 $7 200 6 Supply 5 Quantity

Movement along the supply curve A change in price and only in price Causes a movement along the supply curve Called a Change in Quantity Supplied Supply $6 B $4 A 100 150

Supply Individual supply Market supply The supply of an individual producer Market supply The sum of individual supplies of all producers in the market

Determinants for the Supply Curve Changes in technology Changes in prices of relevant resources Changes in the prices of alternative goods Changes in Producer Expectations Changes in the number of producers

Changes in Supply Caused by changes in the determinants to the supply curve Results in changes to the relationship between the price and quantity supplied At each and every price a different quantity is supplied New supply curve - shift in supply

Increase in Supply At each and every price more of the good is supplied S1 S2 $6 300 400

Causes of increase in Supply Improvements in Technology Changes in relevant resources Decrease in the price of resources Lowers costs Changes in price of alternative goods If price of alternative good increases, supply of the good increases Changes in producers expectations

Changes in technology Technology is the economy’s stock of knowledge about how to combine resources efficiently

Changes in Technology Improvements in technology Causes an increase in supply More of the product is available at all prices S1 S2 $6 300 400

Changes in Relevant Resources Decrease in resource prices Increases the supply of the good at each and every price. S1 S2 $6 300 400

Changes in prices of Alternative Goods Other goods that use some or all of the same resources as the good in question Beef and leather. If the price of beef increases, producers will supply more beef thus increasing the supply of leather. Price S1 S2 $6 Q Leather 300 400 Above is the market for the supply of leather

Changes in Producers Expectations Expectation of future prices of resources or their own product can cause producers to change what they offer at each individual price

Changes in the Number of Producers As the number of producers change so does the supply of the product A decrease in the number of producers will lead to a decrease in supply

Decrease in Supply At each and every price LESS of the good is supplied 5 S1 S2 400 600

Causes of Decrease in Supply Backward movement in Technology Changes in relevant resources Increase in the price of resources Raises costs Changes in price of alternative goods If price of alternative good decreases, supply of the good decreases Changes in producers expectations

Changes in Relevant Resources Are those employed in the production of the good in question Increase in price of resources Results in decrease in supply Less of the good is available at all prices $9 S1 S2 500 600

Changes in prices of Alternative Goods Other goods that use some or all of the same resources as the good in question Beef and leather. If the price of beef decreases, producers will supply less beef thus decreasing the supply of leather. Price S1 $6 Q Leather 300 400 Above is the market for the supply of leather

Producer’s Expectation Nationalization

Expropriation: "occurs when a public agency (for example, the provincial government and its agencies, regional districts, municipalities, school boards, post-secondary institutions and utilities) takes private property for a purpose deemed to be in the public interest".