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Supply-side thinking

Supply-side thinking. Think like a producer (seller), not like a consumer(buyer). Today’s Goals. Students will understand what Supply is. Students will understand what The Law of Supply is. Students will understand what a Supply Shift is. The Set Up.

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Supply-side thinking

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  1. Supply-side thinking Think like a producer (seller), not like a consumer(buyer)

  2. Today’s Goals • Students will understand what Supply is. • Students will understand what The Law of Supply is. • Students will understand what a Supply Shift is.

  3. The Set Up The owner of the local fast-food restaurant is having trouble hiring workers for the closing shift. Although the closers have a few more responsibilities than other workers, including cleaning, the closing shift often fits best with students’ schedules. The owner of the restaurant doesn’t know what to do. He is angry. He says that “Young people today are just plain lazy and maybe spoiled too.”

  4. Is the owner right? Are there other explanations of why young people might choose not to work as closers in the fast-food restaurant? Possible Answers: Could hang out with friends Could Study Maybe there is a better job elsewhere

  5. PRODUCER • Why do producers offer goods and services for sale?

  6. Why do producers offer goods and services for sale? Possible Answers: • Earn Money • Pride in work that others find valuable What do producers do if the price of a good goes up? • Producers will supply more of that good in order to capture more profit. This is the basic idea of the Law of Supply

  7. What will change the quantity supplied?or Why will producers start making more or less stuff to sell? • Because they think they can make more money. This can be called self-interest.

  8. Price effects • Producers can make more money if the price goes up. • More profit means producers make more to sell, and new producers enter the market to get some of the profits. Supply Price they can get (revenue) - Costs(costs of production, input costs) Profit $$$

  9. Activity 1: How Many Hours Are You Willing To Work? Tabulate the number of work hours you are willing to work per week. Provide the information requested in Activity 1. (Just a few minutes) I need four volunteers!

  10. There will be some questions regarding this data!

  11. Your Graph should look something like this: • As prices rise, what happens to the quantity of supply? • Why? • What happens when the price goes down? • Why? • Who determines the amount to supply? (the buyer or seller?)

  12. Other factors that affect supply(Shifts of the supply curve) • Natural disaster Discover new sources, New suppliers enter market • Input costs go up Input costs go down, Technology Less supplyMore Supply Price they can get (revenue) - Costs(costs of production, input costs) Profit $$$

  13. Gov’t actions that affect supply(Shifts of the supply curve) Less supplyMore Supply • Excise tax Subsidy • Regulation Tax breaks (raises (costs) Price they can get (revenue) - Costs(costs of production, input costs) Profit $$$

  14. So, who decides the price of a good or service? • The market decides • aka the market mechanism • aka the invisible hand • aka the self-interest of buyers and sellers combined with the forces of competition • aka the interaction of countless numbers of buyers and sellers

  15. So, if suppliers want to make mo’ money, why don’t they just raise the price? Competition!

  16. Competition • If they try to charge too much, people will buy from other producers. They’ll soon go out of business. This is not in their self-interest! What if they had no competition?

  17. Competition: good for consumers • Competition keeps prices low • and creates incentives for producers to make good quality products, • and creates incentives for producers to innovate (make products better, new features, etc.)

  18. Competition: eliminates the weak/poorly run companies

  19. Article: Destruction of unsold Girl Scout Cookies sparks debate in California • Read the article by your self and think about the questions (4 minutes) • Now pair up with someone close to you (no moving seats) and talk about the questions together (3 minutes)

  20. Article: Destruction of unsold Girl Scout Cookies sparks debate in California • What does this article have to do with supply? • Why do you think suppliers and stores destroy food before its expiration date and not donate it? • How can the San Gorgonio Girl Scouts insure that they do not order more cookies than they can sell? What would be the cost of this? Would anyone benefit? • If the Girl Scouts had sold all of their cookies, would anyone feel that they were obligated to buy more from their supplier and donate these? What is the difference between that case and this?

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