1. SUPPLY Chapter 5

2. Supply
Supply is the desire and ability to produce and sell a product.
The Law of Supply – quantity supplied varies directly with its price P S P S

3. Supply Curve SUPPLY CURVE Price of DVDs Quantity Supplied $25 50 $2040
$15 30
$10 20 $5 10 25
SUPPLY CURVE 20 15 10 5 10 20 30 40 50 60
Quantity

4. Essential Question:
Why would producers be
willing to supply more as the
selling price rises?

5. Change in QuantitySupplied
Change in Quantity Supplied (MOVER) is an increase or decrease in the amount supplied due to a CHANGE IN PRICE.
Stay on the same supply curve
What is similar between the demand & supply movers?

6. Change in Quantity SuppliedF
Price E
MOVES ALONG THE CURVE D C B A
Quantity

7. Changes in Supply
Change in Supply (SHIFTER) is when selling price remains the same, but supply changes due to something other than price.
Must draw a new supply curve
What direction will the curve shift when supply increases?
What direction will the curve shift when supply decreases?
Shift Right (SR)
Shift Left (SL)

8. Change in Supply Decrease SHIFTS LEFT Increase SHIFTS right F Price FB B A A
Quantity

9. 6 Factors for Change in Supply
INPUT COSTS
LABOR PRODUCTIVITY
EXPECTATIONS
TECHNOLOGY
6 Factors for Change in Supply
GOVT ACTION
# of PRODUCERS

10. 1. Input Costs
Input costs are the price of the resources needed to produce a good or provide a service.
Cheaper costs = supply increase
Increased costs = supply decrease

11. Cost of production goes down Cost of production goes up

12. 2. Technology New machinery and innovations to production.
Better tech. enables companies to produce more goods.

13. Better technology
Technology shutdown

14. 3. Government Action
Government policies can either help or hurt costs of production.
Taxes, Regulations and…
Subsidies: payments that help to cover some costs, encourage companies to produce a certain good.
Examples
Tax on cigarettes, A subsidy for farmers, The Clean Air Act

15. Subsidy for good
Increased tax on good

16. 4. Number of Producers
With more producers, more goods or serviced are produced,
and vice versa
Examples:
Many car companies exist due to the success of Ford.
Increased competition drove out Pontiac and Saturn.

17. New company joins industry Company drops out of industry

18. 5. Producer Expectations
If producers expect the price of their product to rise or fall in the future, that may affect their rate of production.

19. Producer expects price of good to rise
Producer expects price of good to fall

20. 6. Labor Productivity
Labor Productivity refers to the amount of goods and services that a person can produce at a given time.
Increased productivity means supply increase and vice versa.
Examples:
New training method
Loss of workers

21. New training method
Loss of workers