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supply

supply. amount of goods and services business firms are willing and able to provide at different prices. Law of Supply. the higher the price, the greater the quantity of the product a supplier will produce. business. a seller of goods or services. supply schedule. table of supply data.

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supply

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  1. supply amount of goods and services business firms are willing and able to provide at different prices

  2. Law of Supply the higher the price, the greater the quantity of the product a supplier will produce

  3. business a seller of goods or services

  4. supply schedule table of supply data

  5. supply curve line-graph of supply schedule information

  6. 1.20 1.10 1.00 Supply Curve .90 .80 .70 .60 .50 .40 2000 1000 5000 3000 4000

  7. $30,000 $25,000 Vertical graph $20,000 $15,000 $10,000 $5,000 2 1 3 4

  8. $600 $500 Horizontal graph $400 $300 $200 $100 20 10 30 40 50 60

  9. change in quantity supplied when a change in price buyers will pay causes a change in the number of goods supplied

  10. .50 1.20 1.10 Change in Quantity Supplied 1.00 .90 .90 .80 .70 .60 .50 .40 2000 1000 5000 3000 4000

  11. Change in Supply • decrease in supply • leftward shift • suppliers produce less at any given price

  12. Change in Supply • increase in supply • rightward shift • suppliers produce moreat any given price

  13. 1.20 1.10 1.00 .90 .80 .70 .60 Decrease in Supply .50 .40 2000 1000 5000 3000 4000

  14. 1.20 Increase in Supply 1.10 1.00 .90 .80 .70 .60 .50 .40 2000 1000 5000 3000 4000

  15. Supply Shift Factors • change in technology • change in production costs • change in price of related goods

  16. Change in Technology • improves tools used to produce goods and services • improves production or reduces cost

  17. Change in Production Costs • costs of natural resources, labor, and financial capital • changes in these costs affect supply

  18. Change in Price of Related Goods • usually substitute goods • shift production to the more-profitable good

  19. Market Equilibrium Point price at which consumers are willing to pull out of the market the exact quantity of product that suppliers are willing to push in

  20. 1.30 1.20 demand 1.10 1.00 .90 supply .80 .70 market equilibrium .60 .50 3000 1000 2000 7000 8000 4000 5000 6000

  21. Economies of Scale • the more produced, the cheaper each product • supply more with hopes that demand increases

  22. surplus an excess of unsold products

  23. Surplus Costs • storage • security & insurance of the goods • spoilage of the goods • loss of income • interest costs of financing

  24. Surplus Solutions • increase demand for the goods • decrease the supply • allow the price to fall to the equilibrium point

  25. Surplus Solutions • increase demand for the goods • first and best solution for the supplier • produce a great quantity and charge a higher price • “demand solution”

  26. 1.35 1.30 1.20 1.10 1.00 demand2 .90 .80 demand1 supply .70 .60 3000 1000 2000 7000 8000 4000 5000 6000

  27. Surplus Solutions • increase demand for the goods • increasing tastes & preferences • eliminate substitute goods • establish price floors

  28. Surplus Solutions 2) decrease the supply • cut production • “supply solution” problems = competition reaction

  29. 1.35 1.30 supply2 1.20 1.10 1.00 .90 .80 supply1 .70 demand .60 3000 1000 2000 7000 8000 4000 5000 6000

  30. Surplus Solutions increase demand decrease supply • demand solution • supply solution • shifts the demand curve • shifts the supply curve • favored by suppliers

  31. Surplus Solutions 3) allow the price to fall to the market equilibrium point • the market does the work • supplier = gradually lowers price • buyer = purchases more at lower price • surplus gone; price stops falling

  32. 1.40 1.30 1.20 1.10 1.00 .90 .80 .70 .60 3000 1000 2000 7000 8000 4000 5000 6000

  33. Surplus Solutions • increase demand for the goods • decrease the supply • allow the price to fall to the equilibrium point

  34. shortage • caused by the price of a good being held lower than its market equilibrium price • not enough of a good

  35. loss leaders products deliberately sold at a loss to lure in customers

  36. Price Ceilings • government restrictions on prices • prevent prices from rising to equilibrium value • always causes shortages

  37. Shortage Solutions • decrease demand • increase supply • allow the price to rise to the market equilibrium point

  38. Shortage Solutions • decrease demand • “demand solution” • by discouraging demand for a product

  39. 1.20 1.10 supply 1.00 .90 .80 demand2 .70 .60 demand1 .50 .40 3000 1000 2000 7000 8000 4000 5000 6000

  40. Shortage Solutions 2) increase supply • “supply solution” • by: • managing supply • improving technology • boosting productivity

  41. 1.10 1.00 supply1 .90 .80 demand .70 .60 .50 supply2 .40 .30 3000 1000 2000 7000 8000 4000 5000 6000

  42. Shortage Solutions decrease demand increase supply • demand solution • supply solution • shifts demand curve • shifts supply curve • dangerous to suppliers • focus on technology or production

  43. Shortage Solutions 3) allow the price to rise to the market equilibrium point • not imposing price ceilings • benefits: • encourages conservation and discourages wastefulness • motivates entrepreneurs to enter the market

  44. 1.10 1.00 supply .90 .80 demand .70 .60 .50 .40 .30 3000 1000 2000 7000 8000 4000 5000 6000

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