Presentation Transcript

1. Supply- Amount of a good or service that a producer is willing to sell at each 
particular price -Law of Supply- the higher the price, the larger the quantity 
produced P = QS
2. Supply Schedule- lists how much of a good 
a supplier will offer at different prices Market Supply Schedule- lists how much of 
a good ALL suppliers will offer at different 
prices
3. Supply Schedule
4. Supply Curve $4 $3 Price $2 $1 0 30 20 40 10 Quantity Supplied/Output
5. Market Supply Schedule
6. Market Supply Curve $4 $3 Price $2 $1 1,000 2,000 3,000 4,000 Quantity Supplied/Output
7. What causes producers to vary their supply of 
goods & services PROFIT - producers actions are based on 
the pursuit of profit  - Amount of money remaining after 
producers have paid all of their costs   - Make a profit when incoming revenues 
are greater than costs of production
8. Production Costs *Operating Cost- cost of operating a facility (factory or store) 1. Fixed Cost- cost that doesn't change Examples: rent, interest on loans, property 
insurance premiums, local and state property 
taxes, and salaries Overhead - Total Fixed Costs
9. 2. Variable Cost- cost that rises or falls 
depending on how much is produced - Examples: raw materials, wages, etc 3. Total Cost = fixed cost + variable cost 4. Marginal Cost- cost of producing one 
more unit of a good
10. Prices for sports team memorabilia may increase during a 
successful season. How does this increase reflect the law of supply?
11. Supply Shifts REMEMBER A CHANGE IN PRICE IS 
ALWAYS A MOVEMENT ALONG THE 
CURVE
12. Determinants of Supply 1. Price of Resources 2. Government Tools 3. Technology 4. Competition 5. Price of Related Goods 6. Producer Expectations
13. Price of Resources Resource: anything that is used in the 
production of a good or service  - ex: wages, electricity, raw materials
14. Government Tools Tax: required payment of money to the 
government to help fund government services  - Businesses pay taxes on the materials, 
property and profit  - EX. Higher Taxes, businesses are faced 
with higher costs of production & prospects of 
making less profit & will supply less of their 
product, supply curve will shift to the ________
15. Government Tools Subsidies: payments to private businesses by the government  ex. Wheat Excise Tax: are taxes paid when purchases 
are made on a specific good  ex. Gasoline, Tobacco
16. Technology Can have a powerful impact on supply, such 
as a new tool or chemical process New technology makes the production more 
efficient and less expensive  New automatic espresso machines 
have made the process of 
producing drinks at Starbucks more 
efficient and very fast.
17. Competition Competition tends to increase supply Lack of competition tends to decrease 
supply
18. Another example of Competition: Recently a Cold Stone Creamery was put up next to a local ice 
cream shop in Wadena. Cold Stone Creamery Local Ice Cream Shop
19. Price of Related Goods Supply for one good often is connected 
to the supply for its related goods Change in a products price can affect 
the supply for the product’s related goods The price of cocoa has risen tremendously in 
the past few weeks. What impact will this 
have on the supply of mocha based drinks?
20. Producers Expectations Supply will vary on the expectations of 
the producer Good expectations = good supply, bad 
expectations = low supply Summer weather is coming soon. 
McDonalds is aware of this & wants to 
change their McCafe menu. What will 
McDonalds do to meet the needs of their 
consumers?
21.  Pizza Ranch decides to only carry Pizza because 
prices for chicken has drastically risen. Pizza P S Q
22. Starbucks baristas no longer have to hand write drink 
specifications onto the paper cups for the drink makers at the 
espresso machine. A new order-printing-sticker system has been 
devised to make the assembly line of drink making a much faster 
process. Starbucks Products P S Q
23. Recently, all Subway stores in the Twin Cities area have offered a deal of 
“buy 1 sub sandwich and receive a coupon for ½ off your next sub sandwich.” 
What will happen to the Jimmy John's down the street? Jimmy John's Subway P S P S Q Q
24. All food industries (including coffee and beverage stores) have 
been subjected to new, very strict FDA policies on how food and 
beverages must be delivered, stored, distributed and discarded 
of. P S Q
25. Productivity Their resources are being used in 
production Look at productivity to maximize your 
profits Total Product - All of a product a company makes in a given time period, 
with a given amount of input
26. Marginal Product - change in output generated by adding one more unit of input
27. Labor & Output Marginal Product of Labor- change in output from hiring one additional unit of labor 1. Increasing Marginal Returns- level of production in which the marginal product of 
labor increases as the number of worker 
increases 2. Diminishing Marginal Returns- marginal product of labor decreases as number of 
workers increases
28. Elastic Supply Exist when a small change in price causes a 
major change in the quantity supplied Products with elastic supply can be made: 1. Quickly  2. Inexpensively  3. Using a few readily available resources EX. Sports teams’ souvenirs: T-shirts, 
posters, hats
29. Inelastic Supply Price change has little impact on quantity 
supplied Products are inelastic if production requires a 
great deal of: 1. Time  2. Money  2. Not readily available resources Ex. Gold, fine arts, space shuttles, lake lots 
(supply is usually fixed)