1. Supply 1

2. Supply Defined What is supply? Supply is the different quantities of a good that sellers are willing and able to sell (produce) at different prices. What is the Law of Supply? There is a DIRECT (or positive) relationship between price and quantity supplied. As price increases, the quantity producers make increases As price falls, the quantity producers make falls. Why? Because, at higher prices profit seeking firms have an incentive to produce more. EXAMPLE: Mowing Lawns 2

3. Example of Supply You own an lawn mower and you are willing to mow lawns. How many lawns will you mow at these prices? Price per lawn mowed Quantity Supplied Supply Schedule 3 $1 $5 $20 $50 $100 $1000

4. An Introduction to Supply supply schedule Economists analyze supply by listing quantities and prices in a supply schedule.

5. GRAPHING SUPPLY Q o $5 4 3 2 1 Price of Cereal Quantity of Cereal Supply Schedule 10 20 30 40 50 60 70 80 Draw this large in your notes 5 Price Quantity Supplied $550 $440 $330 $220 $110

6. An Introduction to Supply individual supply curve An individual supply curve illustrates the various amounts supplied at each price that would prevail in the market.

7. An Introduction to Supply upward slope When the supply data is graphed, it forms a supply curve with an upward slope.

8. An Introduction to Supply market supply curve market A market supply curve illustrates the amounts offered at various prices by all firms in the market.

9. An Introduction to Supply

10. Supply vs. Quantity Supplied SupplySupply is the amount of a product that would be offered for sale at all possible prices that could prevail in the market. It’s the big picture. It’s the curve. uantity suppliedQuantity supplied is the amount that producers bring to the market at any given price. It’s a specific point in time at a specific price. It’s a point on the curve.

11. Change in Quantity Supplied If prices fall too low, producers have the freedom to slow (or stop) production or leave the market completely. If the price rises, the producer can step up production levels if they choose. quantity supplied change in priceA change in quantity supplied is the change in amount offered for sale in response to a change in price.

12. Change in Quantity Supplied

13. Change in Supply New topic…

14. Change in Supply change in supply situation A change in supply is when a situation occurs which causes a change in the number of products for sale at all possible prices in the market.

15. Change in Supply factors) There are many different situations (factors) that can cause a change in supply. Factors such as cost of labor, technology, taxes, etc. can cause an increase or decrease in supply.

16. Change in Supply the cost of inputsthe cost of inputs (labor, packaging, etc.) inverse relationship productivity levelsproductivity levels (motivation, training, efficiency) positive or negative effects technologytechnology (new software, machines, etc.) improvements or failures 7 Factors that can cause a change in supply:

17. Change in Supply taxes and subsidiestaxes and subsidies change in taxes support of farmers positive and negative effects expectationsexpectations future increase in prices might withhold production 7 Factors that can cause a change in supply:

18. Change in Supply government regulationsgovernment regulations safety regulations positive and negative effects number of sellersnumber of sellers Businesses entering and exiting the market can move the curve left or right 7 Factors that can cause a change in supply:

19. Change in Supply Negative Factor Decrease in Supply Shift to the Left Positive Factor Increase in Supply Shift to the Right

20. Change in Supply

21. Supply Practice First, identify the determinant (shifter) then decide if supply will increase or decrease 21 Shifter Increase or Decrease Left or Right 1 2 3 4 5 6

22. Supply Practice Hamburgers 1. Mad cow disease kills 20% of cows 2. Price of hamburgers increase 30% 3. Government taxes burger producers 4. Restaurants can produce burgers and/or tacos. A demand increase causes the price for tacos to increase 500% 5. New bun baking technology cuts production time in half 6. Minimum wage increases to $20 1.Which determinant (SHIFTER)? 2.Increase or decrease? 3.Which direction will curve shift? 22

23. Time Out! To Be Continued…

24. Quick Review 1. Define supply 2. Define the Law of Supply 3. How can you best explain the reason for the Law of Supply? 4. Describe the difference between a change in supply and a change in the quantity supplied 5. Name four of the seven determinants of a change in supply 6. Name the other three determinants of a change in supply 7. Name 10 candy bars

25. Elasticity of Supply Remember: elasticity is a measurement….

26. Determinants of Supply Elasticity Supply elasticity is related to how quickly a producer can act when a change in price occurs. quicklyelasticIf adjusting production can be done quickly, the supply is elastic. complex inelasticIf adjusting production is complex and requires much advance planning, the supply is inelastic.

27. Elasticity of Supply Can the purchase be delayed? Are there adequate substitutes? Does the purchase require a large portion of income? Supply elasticity is not concerned with: Supply elasticity is only concerned with how quickly a producer can act when a change in price occurs.

28. Elasticity of Supply elastic Supply is elastic when an increase in price leads to a larger increase in output (supply). Here, when price doubles, quantity supplied triples. Thus, this product is elastic.

29. Elasticity of Supply Here, when price doubles, quantity supplied only increases 50%. Thus, this product is inelastic. inelastic Supply is inelastic when an increase in price causes a smaller increase in supply.

30. Elasticity of Supply unit elastic Supply is unit elastic when a change in price causes a proportional (same) change in supply. As you can see, when price doubles, so does the quantity supplied. This product is unit elastic.

31. Elasticity of Supply

32. Quantity (Q)