Economics Mr. Kirby CHS Unit 2: Lesson # 5 Supply Shifters

1. Economics Mr. Kirby CHS Unit 2: Lesson #5 Supply Shifters

2. Warning Concentration on these slides is guarantied to improve your economics grade.

3. We will be using Cornell Note Taking Format Today! Smile and “Own the Day! Take one step at a time to Success in Economics class!

4. Unit Two: Learning Objectives: North Clackamas School District Social Studies Priority Standards: • HS.51 (A):Explain how supply and demand represents economic activity and describe the factors that cause them to shift.

5. Lesson Five: Daily Learning Target I Can define and explain in writing the following key Economic concepts: • Supply Shifters • “R-A-T-S-N-E-S-T”

6. Review of Supply

7. Supply (and Demand) “Bread & Butter” of Economics[“perfectly competitive markets”] Butter Bread Law of Supply– QSvariesdirectlywithprice. Suppliers offer more for sale athigher prices than at lower prices. The consumers, being on the paying end, tend to buy a small amount of the product, but will buy more if the price is lowered. The supplier, on the receiving end, considersprice as anincentive to sell a product. The higher the price, the more incentive he has.

8. Let’s Make More!! Law of Supply S P2 - As price increases …QS also increases P1 QS1 QS2 Take it. We are losing money. S P1 • As pricedecreases • … QS alsodecreases P2 QS2 QS1 Directrelationship between P & QS

9. Changes in Supply • Increase in Supply • More quantity supplied at all prices • Supply Curve shifts right • Decrease in Supply • Less quantity supplied at all prices • Supply Curve shifts left • “Price does not change [shift] Supply”. • Price can only change [cause a movement] “QS”.

10. Supply Shifters

11. Now, Let's Take A Look At The Seven Supply Shifters ["RATNEST"]

12. Supply Shifters [“RATNEST”] • ResourceCost[wages & raw materials] • AlternativeOutputprice changesTechnology • NumberofSuppliersExpectation(Suppliers)about future price Subsidies Taxes Decr in “S” of broccoli Bigger supply of games Up down

13. ResourceCost[wages & raw materials][Inverse] Wages Raw Materials Intel Pentium Chip If resource cost increases supply Decreases [making less $] S If resource cost decreases supply Increases [making more $] S S P

14. ResourceCost[wages & raw materials][Inverse] Wages Raw Materials If resource cost increases supply Decreases [making less $] If resource cost decreases supply Increases [making more $] S2 S1 S2 P

15. Resource Cost Example S3 S2 S1 ResourceCost [wages & raw materials] [inverse] Increase in wages (increases/decreases) supply. Ex: A decrease in the price of computer chips (increases/decreases) the supply of computers. P

16. Alternative Output Price Change [Inverse] These are “things that can be supplied with the same resources”. I only have 200 acres Corn S1 Broccoli S2 P1 S P2 P QS1 QS2 Producers want to produce more of the good where price is increasing, Corn Broccoli S1 S P1 S2 P P2 QS1 QS2 or at least, where the price is not going down. “Substitutes in production”

17. Alternative Output Example [Production Substitute] S3 S1 S2 AlternativeOutput price changes[inverse] If the price of corn decreases, thesupply of broccoli(increases/decreases). P S1 S2 P Supply of broccoli

18. Technological Improvement “Can’t wait till Milking time.” This lowers production costs & increases “S”. Ex: Suppose a new milking machine called “The Invisible Hand” has a very soothing effect on cows; cows find the new machine so “udderly” delightful that they produce 30% more milk. This technological advance will cause a shift to the right.

19. P S1 $50 Q Number of Suppliers [Direct] The NFL was joined by… There was a new USFL in 2011 with 10-12 teams. S2 UFL started in 2009 5 Teams on HD Net The UFLhas teams in these 5 cities. 1.*Las Vegas Locos 2. NY Sentinels 3. Florida Tuskers 4. Sacramento Mountain Lions 5. Hartford Colonials *Champs for 2009 More games each week QS1 QS2 Supply of FB games each week UFL [United Football League] Supply of FB games increased when the UFL was formed.

20. Bigger Supply of Basketball Games in 1968 with the ABA DallasChaparrals “I’m going for “3” “Bigger supply of basketball games every week”

21. P S1 $2.00 Q What Happens To Supply If There Is A Decrease in # of Suppliers? S2 S3 Supply decreased when the number of suppliers was reduced. QS2 QS1 QS3 If the number of firms in the market increases, supply will also increase.

22. Producer Expectations about Future Price [“INVERSE”] S2 S1 S2 P If the Bubba Gump Shrimp Companyexpects shrimp prices to decrease more in the future, they will supply (more/less) shrimp to the market now.  If the Bubba Gump Shrimp Companyexpects shrimp prices to increase more in the future, they will supply (more/less) shrimp to the market now. 

23. Subsidies - free money from government [Direct] S3 S1 S2 P Free money from the government (subsidies) induces suppliers to supply more. If subsidies are taken away, then suppliers are losing money and will decrease supply.

24. Taxes Take Away Business Profits & Decrease Supply. [Inverse] S3 S1 S2 P If business have their taxes decreased, it moves the supply curve to the right. If business have their taxes increased, it moves the supply curve to the left.

25. Milk Quiz Coming Up Put + or –; D or S

26. [“+ or –”; “D” or “S”] I love Enya. S & D Quiz 2 for “Milk” 1. Milk producers hire fewer union workers, decreasing resource cost. 2. An increase in price of the alternative output cheeseaffect milksupply. 3. A positive report on the benefits of milk affect the taste for milk. 4. Milk demand is affected by a decrease of 20 million consumers. 5.Cookies, a complement of milk, decrease in price & therefore affect the demand for milk. 6. A technological breakthrough is discovered by a student who discovers that cows supply more milkif Enya is singing during milking. 7. Milk producers expectmilkprices to increase 25% in two weeks. 8. Due to a deadly cow plague (caused by too much cow belly dancing),milk availabilityis expected to shrink by 60% & impact the current demand for milk. 9. Subsidies for milk production are decreased by 20 cents per gallon. 10. The price of orange juice, a substitute for milk, decreased by 20%. 5 Demand Shifters7 Supply Shifters 1. Taste- direct1. Resource cost [wages/raw materials – INVERSE 2. Income [normal-direct; inferior-INVERSE2. Alternative outputprice changes - INVERSE 3. Market size (# of consumers–direct3. Technology - direct 4. Expectations (Consumer) availability-INVERSE 4. Number of suppliers - direct future income-direct; future price-direct; 5.Expectations[producer] about future price-INVERSE 5. Related good price changes6. Subsidies - direct [substitutes-direct; complements-INVERSE7. Taxes - INVERSE 1. +S 2. -S 3. +D 4. -D 5. +D 6. +S 7. -S 8. +D 9. -S 10. -D

27. SUPPLY PRACTICE: • WHEN YOU ARE FINISHED….Skim through Chapter 5 (page 123-128)Answer questions 3-9 (page 128) on a piece of notebook paper and turn directly into me today. THIS CAN BE DONE IN PARTNERS! • Pick up todaysgraphing worksheet from me. Work on this independently. Turn directly into me. I want to personally check your level of understanding on these concepts.