Transcript Supply - Wsfcs

With demand,
you were the consumer!
With supply,
you are the producer…
the entrepreneur…
the business owner…
You are trying to make a PROFIT!!!
Supply!
How much should a producer
supply on the shelves of a store?
21-3
In the last chapter, we
learned that demand sets
prices!
 For example, if a popular pair of shoes
has just gone on the market…
 and demand is high…
 Producers will set the price HIGH! Why?
 Because the producer wants to make a
lot of $$$ off your demand!
#1
Supply is . . .
 Various quantities of
a good/service
producers are willing
to sell at various
prices
 Look at p.582
$20
$40
#3
#2
 Supply is the opposite of
demand.
 When we learned about
demand…
buyers/consumers demanded
different quantities
of a good depending on the
price
that sellers ask.
 With supply, suppliers/producers
offer different quantities
of a product depending on the
price that buyers
are willing to pay.
(Think about that carefully! Read
these 2 answers again slowly.)
#4
Remember with demand:


as prices rise, demand falls.
as prices fall, demand also rises.
#5 
With supply, as price rises for a good, the
quantity supplied also rises. (In other words, if
people are willing to pay a high price, put a lot
of goods on the shelf. It means more $$$ for
the producer!)
 Look at supply schedule & supply curve on
p. 582.
 As price falls for a good, the quantity supplied
also falls. (This is b/c no one is buying the few
that are on the shelf, so the producer puts
them on sale.)
#6 The Law of Supply
This principle states that
suppliers will offer more for sale
at a higher price
and
less at a lower price.
#6 cont’d
The higher the price of the good,
the greater the incentive
for a producer
to make more (of the product).
Add this to your answer:
In other words,
the producer will expect a higher profit
b/c of the higher price.
Therefore, the incentive that
motivates producers is
Profit!
#7a, 7b, 7c
Individual Supply for one video game
company called Software House
 If Software House has 100 video games
on the shelf to be sold, they will sell them
for $50.
 If Software House has 70 video games
on the shelf to be sold, they will sell them
for $30.
 If Software House has 1 video game on
the shelf to be sold, they will sell it for $5.
#7e
Price x Quantity = Total Revenue
Price
Quantity
Revenue
$50
100
$5,000
$40
90
$3,600
$30
70
$2,100
$20
30
$600
$10
10
$100
$5
1
$5
From the chart, how much $ would you like to earn?
To make the most profit, your company would have 100 games on the shelf &
sale them for $50! $5000 in total revenue!
#8
In the supply curve,
 Quantity represents
 the amount of a good/service a business/producer is
willing to supply/produce.
Note:
Don’t confuse this w/ the demand. With demand,
quantity represented how much YOU were
willing to buy. This is supply! Here, quantity is
how much you will sell.
#9
The supply curve slopes
 UP!
 Remember, the demand curves slopes
down.
#10
 This reflects that suppliers are willing to
offer more products at a higher price and
fewer products at a lower price (because
they have gone on sale & there aren’t
many left).
#11
 They won’t be able to pay their bills!
 They won’t be able to make a profit in
order to make $$$$$!
#12
Profit is defined as . . .
 The amount of money a business
receives above its (fixed & variable)
costs!
#13
Producers can use their
profit in 3 ways:
a. increase the wages of its workers!
(investing in human capital)
b. purchase other things the company
needs (office equipment, scanners)
c. keep the profit for themselves & spend it.
#14
Market Supply is defined
...
as
 Combining all the supply schedules of all
businesses that provide the same type of
good or service
 examples: all sporting goods stores
all car washes
all video game stores
all music stores
#15
Market Supply for all video game companies
(Sony, Nintendo, XBox)
Price
Quantity
Revenue
$50
275
$13,750
$40
225
$9,000
$30
180
$5,400
$20
105
$2,100
$10
55
$550
$5
30
$150
#16
The supply curve slopes up
b/c
 Producers are willing to
 sell more games at higher prices
 Why? To make a profit!
#17
The most significant
influence of on quantity
supplied is
Price!
Changes in Supply
 #18
For a change in supply to take place,
producers must decide to offer a different
quantity of output at each possible price in the
market.
 #19
When the supply goes down, the supply curve
shifts left. When supply goes up, it shifts to the
right.
We will now skip to #24 to
fill in the big chart!
 Follow the instructions!
#24
The factors that affect supply &
determine how many goods are sold
(All of these need to be listed in the far left hand box for your chart in # 24.)








Changes in the cost of resources
Productivity
Technology
Changes in Govt. Policies
Changes in Taxes
Changes in Subsidies
Changes in Expectations
Changes in the # of Suppliers
Fill in the answers for #24.
Factor
Example of
Increase in Supply
Example of
Decrease in Supply
Changes in the cost of resources
Productivity
Technology
Changes in Govt. Policies
Changes in Taxes
Changes in Subsidies
Changes in Expectations
Changes in the # of Suppliers
In order to fill these boxes in,
the next 8 slides will give you
the information that needs to
be copied. If you think your
handwriting won’t fit, you may
use a separate sheet of
paper. Go ahead & click to
the next slide.
Changes in the cost of resources
( the supplies you need to make your product)
Increase in Supply
 You own a cake company.
 On a regular week, you make
100 cakes.
 The price of eggs, milk, and
flour all go on sale & are 50%
off.
 You can now produce 120
cakes.
*******************************
 The cost of your resources
went DOWN, so your supply
of cakes went UP = increase
in supply!
Decrease in Supply
 The price of eggs, milk, and
flour all go up.
 You can only produce 85
cakes instead of 100.
***********************************
 The cost of your resources
went up, so your supply of
cakes went down = decrease
in supply!
Productivity
(making goods faster, more efficient)
Increase in Supply
 The Barbie doll company
figures out they can get
dolls made faster if its
workers work in an
assembly line!
 Station 1: puts on arms
 Station 2: puts on legs
 Etc, Etc.
 They can get 2x as
many dolls completed.
 Supply of Barbies
increase!
Decrease in Supply
 The Barbie Doll
company has each
worker making an entire
doll all by himself.
 Some dolls are missing
an eyeball. Some have
no left arm. Those dolls
have to be thrown out.
 Decrease in Barbies!
Using Technology
Increase in Supply
 A grocery store has its
cashiers use cash registers
to check-out customers.
 Grocery stores also use
scanners.
 Faster technology = can get
customers through the line
more quickly!
 Therefore, more goods sold!
 Supply of goods going out the
door (sold) goes increases!
Decrease in Supply
 A grocery store has its
cashiers checking out
customers using a calculator
(or worse, doing the math on
w/ pencil & paper)
 This is taking too long!
 The check-out lines have 20
customers waiting & many are
getting frustrated.
 Several customers leave!!
 Goods aren’t being sold.
 Supply of goods going out the
door (not sold) decreases!
Changes in Govt. Policies
Increase in Supply
Decrease in Supply
 Changes in govt. policies  20 people work at McD.
very, very rarely leads to  The govt. raises minimum
an increase in supply.
wage to $10/hr.
 This adds to McD’s variable
costs.
 McD has to fire 10 workers
b/c they can’t pay
everyone.
 Those 10 people who are
left working can’t produce
as many hamburgers.
 Decrease in supply of
hamburgers!
Changes in Taxes
Increase in Supply
 The govt. lowers the
taxes on a business’
equipment.
 Its variable costs go
down.
 The business can
produce more goods
b/c of low taxes.
 Increase in supply!
Decrease in Supply
 The govt. raises the
taxes on a business’
equipment.
 Its variable costs go
up.
 The business
produces fewer
goods b/c of high
taxes.
 Decrease in supply!
Changes in Subsidies
(when the govt. pays a portion of the costs for a
business)
Increase in Supply
 It costs a farmer $500 to ship
its milk out of state.
 The govt. subsidizes the cost
& agrees to pay $300 of it.
 The farmer can ship even
more milk b/c the govt. is
going to help pay for it.
 It’s like free money as long as
the business it doing right.
 Increase in the supply of your
product to be sold! More $$ in
the entrepreneur’s pocket.
Decrease in Supply
 Govt. subsidies do not cause
a decrease in supply unless
the govt. has to take the
subsidy away.
Changes in Expectations
Increase in Supply
 Businesses expect
that consumer
demand will be high
in the future.
 Therefore, business
will prepare to make
lots of their product.
 Example:
 Preparing to sell
iPads
 Increase in supply of
iPads
Decrease in Supply
 Businesses expect
that consumer
demand will be low in
the future.
 So, they will make
less of their product.
 Example:
 Not making as many
desktop computers
 Decrease in supply
of desktops
Changes in the # of Suppliers
Increase in Supply
 More suppliers selling
goods in the market:





Nike
Reebok
Adidas
Nu Balance
Whoa! That’s a lot of
shoes!
 Supply of shoes
increase!
Decrease in Supply
 When suppliers go out of
business or leave the
market.
 Supply of shoes
decrease!
Now, back to #20 -23.
Elastic Supply & Inelastic Supply
20. Define supply elasticity.
the measure of how the quantity supplied of a
g/s changes in response to the price
21. A product is said to be supply elastic if quantity
changes a lot when prices go up or down.
Example: selling kites, bikes, cars
22. How is oil an example of supply inelastic?
b/c when oil prices go up, oil companies can’t
just quickly dig a new well, build a pipeline, build
an oil refinery, and make the gas. Inelastic supply
of goods is not that easy, not flexible. It takes a
while to get those goods made.
23. A product is said to be supply inelastic if quantity
changes very little.
 Example: oil