Transcript Supply - McEachern High School

The
Wonderful
World of…..
Supply
Essential Standards
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The student will explain how the Law of
Supply works to determine production and
distribution in a market economy.
The student will define the Law of Supply.
The student will identify and illustrate on a
graph the factors that cause changes in
market supply.
The student will define price elasticity of
supply.
Two Definitions of “Supply”
►Supply—the
amount of goods
available.
►Quantity
Supplied—the
amount a supplier
is willing and able
to supply at a
certain price.
The Law of Supply
An increase in the price of a good or
service leads to an INCREASE in the
quantity supplied…
 A decrease in the price of a good or
service leads to a DECREASE in the
quantity supplied.
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Price
and Quantity
Supplied have a DIRECT
relationship.
Supply Schedule
Price per Car
Stereo
 $500
 $400
 $300
 $200
 $100
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Quantity
Supplied
 4000
 3750
 3500
 2500
 0
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Supply Curve
P
R
I
C
E
$600
$500
$400
$300
$200
$100
$0,0
1000
2000
3000
4000
5000
6000
Quantity Supplied
Elasticity of Supply
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Elasticity of Supply—a
measure of the way
quantity supplied
reacts to a change in
price.
An orange grove owner
has an INELASTIC
supply.
A factory that makes
plastic calculators has
and ELASTIC SUPPLY.
If demand rises, the
factory can run 24
hours/day, quickly
increasing the supply
of calculators.
Elastic or Inelastic SUPPLY?
Diapers
A.) elastic
B.) inelastic
Walnuts
A.) elastic
B.) inelastic
Engineers
A.) elastic
B.) inelastic
Toasters
A.) elastic
B.) inelastic
Peaches
A.) elastic
B.) inelastic
Doughnuts
A.) elastic
B.) inelastic
Supply
Shifts
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1.
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2.
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3.
When the entire supply of a product increases or
decreases, the supply has SHIFTED.
What would cause a product’s supply to shift?
Prices of RESOURCES—if the price of lumber rises, the
supply of furniture will…
Shift to the LEFT.
Technology—when Henry Ford perfected the assembly
line, the automobile supply…
Shifted to the RIGHT.
Government actions—taxes; subsidies; regulations.
Government Influence-Subsidies
 Subsidy—a government payment
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that supports a business or market.
With some subsidies, businesses
are paid to limit or cease
production of certain products.
Causing supply to shift to the…
LEFT…
And with some subsidies,
businesses are guaranteed
MINIMUM prices for certain
products…
Causing supply to shift to the…
RIGHT.
How do subsidies affect the
AVERAGE AMERICAN?
HIGHER TAXES….
HIGHER PRICES…
Or…
BOTH.
Government Influence--Taxes
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Excise Tax—a tax on the
production or sale of a
good.
Excise taxes increase
production costs by
adding an extra cost for
each unit sold…
And result in a supply
shift to the LEFT.
They are often used on
harmful products, like
cigarettes & alcohol.
Government Influence--Regulation
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Regulation—government
intervention in a market that
affects the production of a
good.
Regulation increases
costs…and lowers supply.
Example—when minimum
wage is INCREASED…
Firms often respond by laying
workers off…
If a business goes from 80
workers to 65 workers…
The supply of their product
will shift…
To the LEFT.
Future Expectations
► Future
expectation of
prices—if a seller expects
the price of a good will
rise in the future…
► They will store the good
& the supply will SHIFT
TO THE LEFT.
► If they expect a price
drop, they will sell
► NOW…
► And the supply will…
► SHIFT TO THE RIGHT.
Number
of
Suppliers
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If more suppliers enter the market…
The supply of whatever good they’re selling
will…?
Shift to the RIGHT.
If suppliers stop producing and leave the
market…
The supply will…?
Shift to the LEFT.
The future expectation of LOW
prices tends to cause supply to...
A.) shift to the right.
B.) shift to the left.
C.) remain unchanged.
Increases in the cost of raw
materials (water, lumber, rubber,
etc.) tend to cause supply to...
A.) shift to the right.
B.) shift to the left.
C.) remain unchanged.
The introduction of new technology
tends to cause supply to...
A.) shift to the right.
B.) shift to the left.
C.) remain unchanged.
Governmental actions like subsidies
and taxes tend to cause supply to...
A.) shift to the right.
B.) shift to the left.
C.) remain unchanged.