1. What do you think supply is?

2. Supply
Supply - Ability and willingness of sellers to make goods and sell products or services
Quantity supplied – amount supplied by a company.
Labor adds to supply
Services

3. Law of supply
As prices of goods increase so does the quantity supplied.
Ex. Farmer and corn supply.
Ex music industry.

4. Supply curve and supply scheduleQ 1 6 2 9 3 12 4 15 5 18

5. Elasticity of supply
Measures how firms will respond to changes in the price of a good
Elastic (sensitive to price increase)
Inelastic (less sensitive to price increase)
Unitary elastic ( moves on a 1/1 basis
Time is a key factor elasticity of supply

6. Elasticity of Supply in the Short Run
Production of goods are usually inelastic in the short run.
Tough to get materials in time to produce more goods
Ex oranges
Production of services are usually elastic in the short run
Hire more workers to get larger supply of services
Barber shop.

7. Elasticity in the Long Run
Time gives suppliers the ability to respond better to price changes
Ex planting more trees

8. Do now What is the law of supply
What does elasticity of Supply explain?
What is a factor in elasticity of supply?
Give two reasons why the supply curve shifts?

9. Why does the Supply Curve Shifts
Input costs
Costs of production increase or decrease will cause a shift in the curve
Technology (automation)
Lower costs and increases supply
Government influence
Subsidies – a government payment to support a business or market
Excise Taxes – reduce supply by adding an extra cost on each unit produced
Regulation – is a government intervention in a market that effects price, quantity, or quality of a good.

10. Why does the Supply Curve Shifts
Change in global economy
Imports
Tariffs and quotas
Future expectations
Number of suppliers in the market

11. Shifts in the Supply curve

12. How do firms decide to hire workers
Marginal product of labor- the change in output from hiring one additional unit of labor.

13. Marginal Return of Labor
Output
Mar. prod. of labor 1 4 2 10 6 3 17 7 4 23 6 5 28 31

14. Increasing Marginal Returns
A level of production in which the marginal product of labor increases as numbers of workers increases.
Diminishing Marginal Returns
A level of production at which the marginal product of labor decreases as the number of workers increase

15. Marginal Return of Labor
Output
Mar. prod. of labor 1 4 2 10 6 3 17 7 4 23 6 5 28 31

16. Fixed Costs or overhead
Costs that stay the same no matter how much is produced.
Ex rent
Insurance
Taxes
Loans
Machines and capital goods

17. Variable Costs or operating costs
Change with the amount of production.
Spending on raw materials
Labor
Overtime
Electric and gas bills
merchandise

18. Total Cost of Production
Is the combination of fixed costs and variable costs.

19. Marginal costs + Marginal Revenue
Marginal Costs are the extra costs of producing one more unit.
Marginal Revenue the additional income from selling one more unit of a good
Average costs
The total cost divided by the quantity produced

20. When are company’s most profitable?
Production costs: When price is = to marginal costs, company’s are most profitable
Biggest margin. Between total costs and total revenues.

21. bb fc vc tc mc 36 1 8 44 2 12 48 4
M revs
T revs
profit 24
-36
-20 48 3 36 15 51 4 20 56 5 27 63 7 6 72 9 24 72 21 96 40
120 57
144 7 36 48 84 12 8 63 99 15 9 82
118 19 10
106
142 24 24
168 84
192 93
216 98
240 11 36
136
172 30 24
264 93

22. When should a company close a factory?
When total revenue is less than operating costs average variable costs