Supply Mr. Southward

What is Supply?  The amount of a product that would be offered for sale at all possible prices that could prevail in the market;  Do not forget, this is a behavior; not a number.  Supply is showing what would happen at various prices;

The Law of Supply  Because producers are out to make the greatest profit possible, it makes sense for them to see higher prices as a good thing.

Two different ways to view Supply  Supply Schedule  a listing of the various quantities of a particular product supplied at all possible prices in the market

 Supply Curve  the graphical representation of the supply schedule;

The Market Supply Curve  Refer to page 95, read about Individual and Market Supply Curves and explain the difference between the two.

Quantity Supplied vs. Supply  Think back to what we talked about with demand, grab a partner and read about the difference between a change in quantity supplied and a change in supply.

Factors Causing a change in Supply (pages )  Cost of Inputs  Technology  Subsidies and supply  Excise Taxes  Role of Government Rules and Regulations  Changes in the Global Economy  Expectations  Changes in Number of Competitors

Elasticity of Supply  measures how firms will respond to changes in the price of a good or service  >1= supply is very sensitive to changes in price and is elastic  <1 = inelastic  Equal % change in price = to 1= unitary

Costs of Production  How many workers to hire? - read the example on page 97…and…create your own scenario with a partner…*notebook grade*  Marginal Product of Labor – change in output from hiring one more worker (pg. 98)  Increasing Marginal Returns – specialization – increases output  Diminishing Marginal Returns – specialization ends – adding more workers increases total output…but…at a decreasing rate (pg. 98) – limited capital

 Negative Marginal Returns – workers get in each other’s way – disruption of production – overall output decreases

Production Costs  Fixed Costs – does not change – rent…property taxes…salaries  Variable Costs – rise or fall depending on the Q produced – reduce weekly hours for workers…cost of labor = number of workers…electricity/heating  Total Cost = fixed + variable

 Marginal Cost – the additional cost of producing one more unit – chart on pg. 101

Setting Output  Marginal Revenue and Marginal Cost  Responding to Price Changes  The Shutdown Decision *Explain concept and terms in your n/b…yes…it is a n/b grade*