Economics Chapter 4-2 MINI PROJECT – Due November 13 Create a cartoon or comic strip to illustrate an economic concept from the chapter. For example, demonstrating the law of diminishing returns with an “increasing return” character climbing a steep “production” hill. Meanwhile, a diminishing returns” character is about to reach the top of the hill, and a “negative returns” character is tumbling down the other side.

Economics Chapter 4 Section 1 Supply – the quantity of goods and services that PRODUCERS are willing to sell at various possible prices during a given time period Quantity Supplied – the quantity of goods and services that PRODUCERS are willing to sell at each particular price during a given time period

Economics Chapter 4 Section 1 Law of supply – producers supply more goods and services when they can sell them at higher prices and fewer goods and services when they must sell then at lower prices

Economics Chapter 4 Section 1 Profit motive – reasons why producers vary their supply of goods and services Profit – the amount of money remaining after producers have paid all of their costs

Economics Chapter 4 Section 1 Cost of production – include the following: wages and salaries rent interest on loans Bills for utilities raw materials any other goods and services used to manufacture a product

Economics Chapter 4 Section 1 Elasticity of Supply –the degree to which price changes affect the quantity supplied

Economics Chapter 4 Section 1 Elastic supply The product can be made quickly Is inexpensively to make Can be made using readily available resources

Economics Chapter 4 Section 1 Inelastic supply The product requires a lot of time to make Cost a lot to produce Resources are not readily available

Economics Chapter 4 Section 1 Perfectly inelastic supply If a producer cannot increase supply regardless of price, supply is perfectly inelastic

Economics Chapter 3 – Making Production Decisions Section 3 Total product –all the product a company makes in a given period of time Marginal product – the change in output generated by adding one more unit of input Law of diminishing returns describes the effect that varying the level of an input has on total and marginal product

Economics Chapter 3 – Making Production Decisions Section 3 Fixed costs – production cost that so not change as the level of output changes Overhead – same as fixed cost Depreciation – lessening in value on each and every capital good

Economics Chapter 3 – Making Production Decisions Section 3 Variable cost – costs that change as the level of output changes Total cost – the sum of the fixed and variable production costs Marginal cost – additional costs of producing one more unit of output

Economics Chapter 4 -3 Making Production Decisions Let’s REVIEW Productivity is…. the amount of goods and services produced per unit of input

Economics Chapter 4-3 – Making Production Decisions The law of diminishing returns – as more of one output is added to a fixed supply of other resources, productivity increases up to a point, after which the marginal product diminishes and eventually results in negative marginal product and decreased total product

Economics Chapter 4-3 – Making Production Decisions 3 Stages of The law of Diminishing Returns Increasing marginal returns as more of one output is added to a fixed supply of other resources, productivity increases ( 1 st – 11 th workers) Diminishing marginal return – the point when the output begins to increase at a diminished or lower rate (12 th workers) Negative marginal returns – the changes create a drop in the production curve (13 th – 16 th workers)

Economics Chapter 4-3 – Making Production Decisions Why do producers examine productivity when making supply decisions? Because these costs directly affect profit, and by analyzing them, producers can determine appropriate production goals and potential profits

Economics Chapter 4 Section 3 Homework: Read Special Economics IN THE NEWS On page 93 Answer the questions “What Do You Think?”