Understanding Supply Curve Shifts in Economics

1. Learning Objective: • Today I will be able to determine what shifts the supply curve by providing examples of what shifts the supply curve. • Agenda • Learning Objective • Lecture: Ch. 5.2 Shifts of the Supply Curve • Vocabulary • Exit Slip CONTEMPORARY ECONOMICS: LESSON 5.2

2. Title Notes: Ch. 5.3 Shifts of the Supply Curve • Five determinants of market supply(other than the price of the good) • Cost of resources used to make the good • Price of other goods these resources could make • Technology used to make the good • Producer expectations • Number of sellers in the market CONTEMPORARY ECONOMICS: LESSON 5.2

3. 1. Changes in the Price of Resources • Any change in the costs of resources: • Cost of product more willing/able to supply • Cost of product supply less willing/able to supply • Ex. Price on cheese lowers, therefore, BJ’s is more willing/able to make mozzarella sticks. CONTEMPORARY ECONOMICS: LESSON 5.2

4. 2. Changes in the Prices Other Goods • A change in the price of another good can make certain resources opportunity cost of making a particular good. • Ex. • Mozzarella cheese is the Resource • Price on mozzarella sticks lowers • Therefore, opportunity of making pizza • Better off making more pizza now that price on mozzarella sticks lowered. CONTEMPORARY ECONOMICS: LESSON 5.2

5. 3. Changes in Technology • Discoveries in chemistry, biology, electronics, and many other fields have created new products, improved existing products, and lowered the cost of production. CONTEMPORARY ECONOMICS: LESSON 5.2

6.  4. Changes in Producer Expectations • Any change that affects producer expectations about profitability can affect market supply. • An expectation of higher prices in the future could either increase or decrease current supply, depending on the good CONTEMPORARY ECONOMICS: LESSON 5.2

7. 5. Changes in the Number of Sellers in the Market • Government regulations may influence market supply. • Any government action that affects a market’s profitability, such as a change in business taxes, could shift the supply curve. CONTEMPORARY ECONOMICS: LESSON 5.2

8. S S' $15 12 g h 9 Price per pizza 6 3 0 12 16 20 24 28 Millions of pizzas per week An Increase in the Market Supply for Pizza CONTEMPORARY ECONOMICS: LESSON 5.2

9. S $15 S'' 12 g i 9 Price per pizza 6 3 0 12 16 20 24 28 Millions of pizzas per week An Decrease in the Market Supply for Pizza CONTEMPORARY ECONOMICS: LESSON 5.2

10. Checking for Understanding What are the five determinants of supply, and how do changes in each effect the supply of a good? Cost of resources used to make the good – An increase in the cost of resources this will shift the supply curve inward Price of other goods these resources could make – An increase in this will shift the supply curve inward Technology used to make the good – An increase in this will shift the supply curve outward Producer expectations – An increase in this will shift the supply curve outward Number of sellers in the market – An increase in this will shift the supply curve outward CONTEMPORARY ECONOMICS: LESSON 3.3

11. Movements Along a Supply Curve VS. Shifts of a Supply Curve • A change in price, other things constant, causes a movement along a supply curvefrom one price-quantity combination to another. • A change in one of the determinants of supply other than the price causes a shift of a supply curve, changing supply. CONTEMPORARY ECONOMICS: LESSON 5.2

12. Checking for Understanding Explain the difference between a movement along a supply curve and a shift of a supply curve. A change in price, other things constant, causes a movement along a supply curve from one price-quantity combination to another. A change in one of the determinants of supply other than the price causes a shift of a supply curve, changing supply. CONTEMPORARY ECONOMICS: LESSON 3.3

13. Exit Slip • Pick two determinants of supply. • Provide one example for each. CONTEMPORARY ECONOMICS: LESSON 5.2