1. Supply
E.11, 14, 16, 17

2. Students will…
Understand the relationship between price and quantity supplied (Law of Supply).
Identify and explain what causes supply to change, including gov’t influence, input costs, and the global economy.
Demonstrate shifts in supply curves.

3. Warm Up: Refresh and Brainstorm
Give me the basics of demand:
Law of Demand
Schedule/Curve
How the curve shifts and why
Predict: How do you think supply is similar or different?

4. Quantity supplied increases. Quantity supplied falls.
The Law of Supply
Supply is the amount of goods available.
Law: the higher the price, the larger the quantity produced.
Price of a good rises, firms will produce more in order to earn more revenue/profit
Price of a good falls, firms will produce less; avoid losing $
PRICE
As price increases…
SUPPLY
Quantity supplied increases.
PRICE
As price falls…
SUPPLY
Quantity supplied falls.

5. Law of Supply…
If all things are equal, producers will supply more of a product as its price increase, and less of a product as its price decreases.
Higher prices are incentives for suppliers
Lower prices for the same item will deter suppliers.

6. Supply can change in 2 ways…
Quantity Supplied
Just a change along the supply curve. (similar to demand)
Change in “Supply”
Shift of the entire supply curve (left or right)
More/less product will be supplied at every given price.

7. Supply Schedule Individual/Firm Supply Schedule Market Supply Schedule
$ per slice of Pizza
Slices Supplied per Day
$ per Slice of Pizza
$0.50
100
1,000
$1.00
150
1,500
$1.50
200
2,000
$2.00
250
2,500
$2.50
300
3,000
$3.00
350
3,500

8. Supply Curve
ALWAYS UPWARD SLOPING

9. Changes in Supply Input Costs Government’s Influence on Supply
Imports/Exports
Expectations
Number of Suppliers

10. Input Costs
Any change in the cost of input (factors of production) will affect supply.
Labor, equipment, resources, etc.
If cost goes up, produce less, curve shifts left
Cost goes down, produce more, curve shifts right
Advances in technology can lower production costs in many industries (robots, computers)
Technology lowers costs and increases supply at all price levels.

11. Gov’t Influence on Supply
Gov’t has the power to affect the supplies of many goods – Raise or lower the price of producing goods, gov’t can dis/encourage entrepreneurs/firms/markets within the country or abroad.
Subsidies – gov’t payment that supports a business or market.
Mostly food (farms); usually pay a subsidy for each unit of a good produced.
Why?
Avoid food shortages & feed America, protect young industries, sense of pride, etc.

12. Taxes (Gov’t Influence)
Gov’t can reduce the supply of some goods by placing an excise tax on them – a tax on the production or sale of a good
Increases production costs by adding an extra cost for each unit sold
Goods the gov’t thinks are harmful  cigarettes, alcohol, gasoline
Built-in to the prices so consumers don’t actually realize they’re paying the excise tax.
Causes supply of a good to decrease at all price levels (shift?)

13. Regulation (Gov’t Influence)
Raise or lower supply through indirect means; gov’t regulation often has the effect of raising costs.
Regulation is gov’t intervention in a market that affects the price, quantity, or quality of a good.
Since the 70s, gov’t required industries to install tech to reduce pollution
Cars to produce less auto exhaust – lead-free fuel because scientists linked health problems to gasoline
Increased cost of production, reduced supply (Shift?)

14. Global Economy Supply
Goods and services produced in one country and imported by another to be sold to consumers – supplies of imported goods are affected by changes in other countries
If related markets are doing poorly, suppliers will focus their attention on the current market.
Ex:
US imports carpets from India; increase in wages for Indian workers would decrease supply of carpets to the US market (shift?)
US imports telephones from Japan; new technology decreases cost of production, increase supply (shift?)
US imports oil from Russia, new oil discovery in Russia would increase supply to US market (shift?)
Import Restrictions/Bans

15. Expectations
What was the relationship between expectations and demand?
If a seller expects the price of a good to rise in the future, the seller will store the goods now in order to sell more in the future.
If the price of the good is expected to drop soon, sellers will earn more money by placing goods on the market immediately before the price falls.
Expectations of higher prices will reduce supply now and increase supply later, and expectations of lower prices will have the opposite effect.

16. Number of Suppliers
If more suppliers enter a market to produce a certain good, the market supply of the good will rise, and the SC will shift ???
If suppliers stop producing the good, and leave the market, the supply will decline, SC will shift ???
Positive relationship between the number of suppliers in a market and the market supply of the good.

17. Effects of shifting supply
When the supply curve shifts, it affects quantity and price.
Increase in Supply:
Effect on #?
Effect on $?
Decrease in Supply:

18. Supply Curve Practice

19. Whiteboard, Markers, Erasers

20. 2. Which of the following events would cause supply to increase?
A firm’s technology becomes outdated
More sellers enter the market
War breaks out in a region
Costs of production increase
3. Which of the following events would cause supply to decrease?
Plenty of sunshine and rain, which leads to large harvests.
The opportunities for a company to open a new business in a different market are very good.
Sellers expect good things to happen in the future.
Consumers enter the market.
Define Law of Supply

21. Demonstrate Shifts…
Leading Refrigerator Producer Closes Doors for Good
Maytag Installs Robots on Assembly Line
Drought in Midwest Affects National Supply of Corn

22. Supply/Demand Flag (Project Grade)
Flags include symbols, colors, words that represent important aspects of a country/organization.
You Will….
Create a flag for supply or demand
Must include:
3 symbols
At least 1 color (in addition to your construction paper)
Think about the law of supply/demand and things that can cause a change in supply/demand.
On the back of your flag, explain each element of your flag and how each represents an aspect of supply or demand.