1. Take some time and read pages 148-151 in the textbook
Supply
Take some time and read pages in the textbook
Identify all vocabulary terms
Draw figure 13.1 on page 149 in your notes

2. Supply

3. What is the law of supply? What is the law of demand?
Review Questions
What is the law of supply?
Price goes up, supply goes up
What is the law of demand?
Price goes up, demand goes down
What are the determinants of demand?
Buyers (#), income, tastes, expectations, related goods

4. Supply
Consider this: you produce eggs and milk at your farm. Would you produce more eggs or milk if:
You could get higher prices for eggs (market surged)?
Easter is next week?
Eggs are found to reduce heart disease?
The government offered subsidies (cash back) to increase milk production?
You buy a new machine that cleans eggs twice as fast?
NY places a large tax on milk production
The cost of chickens doubles

5. Supply
Supply: various quantities of a good or service that producers are willing to sell at all market prices
Law of Supply: Producers will produce more goods and services when prices are high, less when low
Direct relationship

6. Introduction to Supply
A supply schedule is a table that shows the quantities producers are willing to supply at various prices
Price per Widget ($)
Quantity Supplied of Widget per day $5 10 $4 8 $3 6 $2 4 $1 2

7. Graphing Supply
Just like demand, Price is always on the vertical axis, Quantity is always on the horizontal
The line that connects the points from a supply schedule are called a supply curve

8. What do you notice about the supply curve?
How would you describe the slope of the supply curve?
Do you think that price and quantity supplied tend to have this relationship?

9. Changes in Supply
Change in the quantity supplied due to a price change occurs ALONG the supply curve
If the price of Widgets fell to $2, then the Quantity Supplied would fall to 4 Widgets.

10. Determinants The following factors make supply shift in an economy:
Resource Costs/Cost of inputs
Expectations about future prices
Number of firms (includes weather and natural disasters)
Technology
Subsidies, taxes, and regulations (government)

11. Final v. Intermediate
Final goods: The goods that consumers actually purchase, finished products (ie: cupcakes) Intermediate goods: goods that are needed to make the finished product (ie: Flour for cupcakes)

12. Resource Costs
If the costs of your intermediate goods increase so does the cost of final product
Example: cost of cheese went up, so did the price of a double cheeseburger at McDonalds

13. Expectations
Just like consumers have expectations (Ie; black Friday), so do producers
If prices are expected to increase, producers produce more. If they are expected to decrease, producers may store their inventory for later release
Does not necessarily apply to firms that produce perishable products (ie: bananas)

14. Number of Firms
When another Taco Bell opens in Binghamton, our supply of Tacos just increased overall
If Sweet Frog went out of business, there would be a decrease in supply of frozen yogurt overall
This determinant applies to the market as a whole, rather than individual production choices (weather and natural disasters)

15. If your technology fails, you aren’t producing anything
Technology that allows you to increase your product faster and cheaper will result in an increase in supply. The opposite is also true.
If your technology fails, you aren’t producing anything

16. Subsidies, Taxes, regulations
Subsidy: The government gives you money to produce something (always leads to increase in supply)
Taxes: Government takes your money when you produce something (leads to decrease in supply)
Regulations: Varies. If there are lots of regulations there will be decrease in supply. Less regulation, more output.

17. Graphing an increase shift in supply
Several factors will change the demand for the good (shift the entire demand curve)
As an example, suppose that there is an improvement in the technology used to produce widgets.

18. Graphing a decrease in supply
Supply can also decrease due to factors other than a change in price.
As an example, suppose that a large number of Widget producers go out of business, decreasing the number of suppliers.

19. The government of Pago-Paga adds a subsidy to boomerang production.
Price S S1
Quantity

20. The government of Pago-Paga adds a new tax to boomerang production.
Price S
Quantity

21. Boomerang producers expect an increase in the popularity of boomerangs worldwide.
Price S S1
Quantity

22. The price of plastic, a major input in boomerang production, increases.
Quantity

23. workers are introduced to coffee and their productivity increases drastically.
Price S S1
Quantity

24. Complete the worksheet on supply shifts
Your Turn
Complete the worksheet on supply shifts