1. Drill 9/17 Determine if the following products are elastic or inelastic: 1. A goods changes its price from $4.50 to $5.85 and the demand for the good goes down 13%. 2. A goods price goes down 26% and the amount of the good demanded goes from 32 to 47. 3. Consumers demand for a product goes from 58 units bought to 73 units bought when the store lowered the price from $186 to $150.

2. 1. A goods changes its price from $4.50 to $5.85 and the demand for the good goes down 13%. Drill Answer Percent change in price $5.85 - $4.50 = $1.35 $1.35 ÷ $4.50 =.3.3 x 100 = 30 Calculating elasticity 13 ÷ 30 =.43 The good is inelastic.

3. Drill Answer 2. A goods price goes down 26% and the amount of the good demanded goes from 32 to 47. Percent change in demand 47 - 32 = 15 15 ÷ 32 =.47.47 x 100 = 47 Calculating elasticity 47 ÷ 26 = 1.807 The good is elastic.

4. Drill Answer 3. Consumers demand for a product goes from 58 units bought to 73 units bought when the store lowered the price from $186 to $150. Percent change in price $186 - $150 = $36 36 ÷ 186 =.194.196 x 100 = 19.6 Calculating elasticity 25.8 ÷ 19.6 = 1.32 The good is elastic. Percent change in demand 73 – 58 = 15 15 ÷ 58 =.258.258 x 100 = 25.8

5. 1. What is a supply schedule? 2. What is the law of supply? 3.What causes supply to change?

6. The Law of Supply The Law of Supply = the higher the price, the larger quantity produced and the lower the price, the smaller quantity produced Higher Production – existing firms produce more to gain a greater profit Market entry – new firms will enter the market because of the greater profitability of the good

7. Supply Schedule Supply schedule = a table that lists the quantity of a good that a producer will supply at each price in the market Market supply schedule = shows the quantities supplied by all producers in the market

8. Supply Schedule PriceQuantity Supplied $204 $4010 $6012 $8015 $10020

9. Supply Curve $80 $60 $40 $20 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 PRICE QUANTITY $100 S1S1 Supply curves always slopes upwards to the right (direct relationship)

10. Costs of Production

11. Labor and Output Labor costs money so each worker must be worth the money that is paid Producers measure the marginal product of labor The change in output from hiring one or more workers

12. Drill 9/18 1. What is the law of supply? 2. What type of relationship is the law of supply? 3. What is a supply schedule?

13. Marginal Product of Labor Worker 1Output 4 beanbags per hourMPL = 4 Worker 2Output 10 beanbags per hourMPL = 6 Worker 3Output 17 beanbags per hourMPL = 7 Increasing Marginal returns – A level of production in which the marginal product of labor increases as the number of workers increases.

14. 1) The Law of Supply = the higher the price, the larger quantity produced and the lower the price, the smaller quantity produced 2) Direct Relationship 3) Supply schedule = a table that lists the quantity of a good that a producer will supply at each price in the market

15. Marginal Product of Labor Worker 1Output 4 beanbags per hourMPL = 4 Worker 2Output 10 beanbags per hourMPL = 6 Worker 3Output 17 beanbags per hourMPL = 7 Worker 4Output 23 beanbags per hourMPL = 6 Worker 5Output 28 beanbags per hourMPL = 5 Worker 6Output 31 beanbags per hourMPL = 3 Diminishing Marginal Returns – A level of production in which the marginal product of labor decreases as the number of workers increase.

16. Marginal Product of Labor Worker 1Output 4 beanbags per hourMPL = 4 Worker 2Output 10 beanbags per hourMPL = 6 Worker 3Output 17 beanbags per hourMPL = 7 Worker 4Output 23 beanbags per hourMPL = 6 Worker 5Output 28 beanbags per hourMPL = 5 Worker 6Output 31 beanbags per hourMPL = 3 Worker 7Output 30 beanbags per hourMPL = -1

17. Marginal Product of Labor NEGATIVE MARGINAL RETURN

18. Production Costs Fixed Costs A cost that does not change, no matter how much of a good is produced Variable Cost A cost that rises or falls depending on how much of a product is produced Total costs = fixed costs + variable costs Marginal cost The cost of producing one more unit of a good

19. Changes in Supply

20. Input Costs A rise in the cost of the factors of production will result in a rise in costs as a whole for the firm so they will cut production Shift to the left Advances in technology can lower production costs causing an increase in production Shift to the right

21. Setting Output Producers look for the optimum amount of output to maximize their profit Not necessarily the most output The optimum output is found when marginal costs equal the market price.

22. Government’s Influence on Supply Subsidies = government payment that supports a business or market Excise taxes = a tax on the production of a good for each unit Regulation = government intervention in a market that affects price, quantity, or quality of a good

23. Other Factors Supply in the global economy Future expectations of prices Number of Suppliers

24. What happens when you are producing to a point where your marginal costs equal the marginal revenue (market price) but the factory is still losing money? SHUT DOWN If the total revenue is greater than the cost of keeping it open (variable costs) do not shut down

25. Understanding Supply Supply = the amount of goods available

26. Drill # 1. What is the marginal product of labor? 2. What are decreasing marginal returns? 3. What is a marginal cost?