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Supply & Demand Analysis

Supply & Demand Analysis. Miss Stack Spring 2008 Economics. SUPPLY Assignment #6. Warm-up. List 5 producers/sellers you have visited in the past month. What did they sell or produce for you? List 5 popular things sellers produce. What is “Supply?”.

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Supply & Demand Analysis

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  1. Supply & Demand Analysis Miss Stack Spring 2008 Economics

  2. SUPPLY Assignment #6

  3. Warm-up • List 5 producers/sellers you have visited in the past month. • What did they sell or produce for you? • List 5 popular things sellers produce.

  4. What is “Supply?” • How much of a good producers are willing and able to offer for sale at each price. • Supply is from the perspective of the seller • What are some examples of goods produced by a seller?

  5. Law of Supply • The quantity supplied is usually directly related to its price – the lower the price, the smaller the quantity supplied and the higher the price, the greater the quantity supplied • Why do you think this holds true?

  6. Quantity Supplied Price Per Pizza Millions of Pizzas per week

  7. Supply Schedule • A list of quantity of a product that producers are wiling to sell at each price • At which price will sellers willing to produce the LEAST pizzas? The MOST? • ONLY PRICES WILL CHANGE “QUANTITY SUPPLIED”

  8. A Shift/Change in Supply • A change in supply is determined by factors called the “Determinants of Supply” • The curve will either shift to the left (decrease) or right (increase)

  9. Increase in the cost of production = Decrease in Supply Decrease in the cost of production = Increase in Supply Major factor that causes a shift in supply

  10. Determinants of Supply • Price of Inputs • Technology • Taxes

  11. Price of Inputs • These are the materials that go into producing your product • Examples: • Plastic (input)  IPods • Cotton  Roxy Sweatshirts • Fiberglass  Surfboards • If the price of inputs increases, producers will usually produce less because their production cost increased. • If the price of inputs decreases, producers will usually produce more because their production cost decreased.

  12. Technology • When new technology is developed supply usually increases because it reduces the cost of production

  13. Taxes • If taxes charged to producers increase, sellers will usually produce less because it increases their cost of production. • If taxes charged to producers decrease, sellers will usually produce more because it decreases their cost of production.

  14. Supply Curve • A downward sloping line • As one variable goes up, the other variable goes down. • It slopes downward because producers will supply less at lower prices, more at higher prices • The supply curve illustrates a inverse relationship between price & quantity

  15. Supply Curve (Rightward Shift) • Increases in Supply Curve will shift to the right

  16. Supply Curve(Leftward Shift) • Decreases in Supply Curve will shift to the left

  17. Supply and Demand Graph

  18. Wrap-Up • When we study Supply we are looking at whose perspective? • What is the difference between “Quantity Supplied” and “Change in Supply?” • What are the “Determinants of Supply?” • Define “price of inputs” and give an example. • Define “taxes” and give an example. • Draw a Demand & Supply Graph-show Prices, Quantity, & Equilibrium

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