Transcript Change in supply

Economics 4/11/11
http://mrmilewski.com
• OBJECTIVE: Demonstration of Chapter#4 and begin
examination of supply.
• I. Administrative Stuff
-attendance & distribution of test
• II. Chapter#4 Test
• III. Journal #15 pt.A
-Examine Figure 5.1 & Figure 5.2 p.114&115
1.) How does the Law of Supply differ from the Law of
Demand?
2.) Why are the supply curves upward sloping?
• IV. Journal #15 pt.B
-notes on supply
Law of Supply
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The principle that suppliers will normally
offer more for sale at higher prices and
less at lower prices.
As price goes up, quantity produced also
goes up
Supply Curve:
• At high prices more
will be supplied. At
lower prices, less will
be supplied.
• Price and quantity
supplied are directly
related.
• The drawing to the
right is a typical
supply curve.
Supply Schedule
• Supply schedule is just
like the demand
schedule, but the
supply schedule shows
both quantity supplied
and price rise together.
Quantity
Supplied
Construct a Supply curve using the
following data
Quantity
Supplied
On your supply curve
• Label the point where price is $15 and
quantity supplied 4 units as point a.
• Next label the point where price is $20 and
quantity supplied is 6 units as point b.
• Movement from point a to point b, or to any
other point along the supply curve is
movement in quantity supplied.
Movement along the Supply Curve/
Change in quantity supplied.
Change in supply
• A change in supply
occurs when
something happens to
cause suppliers to
offer different amounts
of products for each
price in the market.
Change in supply
• A change in supply
occurs when
something happens to
cause suppliers to
offer different amounts
of products for each
price in the market.
What can cause a change in supply to the right?
• Lower cost of inputs such as cheaper labor or
cheaper packaging
• More productive/better trained labor.
• New technology like more fuel efficient delivery
vehicles, better/faster machines
• Lower taxes/government subsidies (subsidy is a
government payment to an individual or business
to encourage or protect a certain economic
activity.)
What can cause a change in supply to the left?
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More expensive labor
Higher taxes
Less efficient workers
Broken technology
Withdrawal of
subsidies
Economics 4/12/11
http://mrmilewski.com
• OBJECTIVE: Examine supply elasticity.
• I. Journal #16 pt.A
-Read “Profiles in Economics” p.121
-Answer question #1 p.121
• II. Return of Chapter#4 Test
• III. Quiz #9
• IV. Journal #16 pt.B
-notes on the elasticity of supply
• V. Econ U.S.A. episode#16
-questions on film
Supply Elasticity
Type of Elasticity
Change in Quantity
Supplied Due to a
Change in Price
Elastic
More than proportional
Unit Elastic
Proportional
Inelastic
Less than proportional
Supply Elasticity
• Supply elasticity is caused by the ability of
a producer to change output.
• If producers can increase output quickly,
supply is elastic.
• If producers can not increase output quickly,
supply is inelastic.
Theory of Production
• The relationship between the factors of
production (land, labor, capital,
entrepreneurs) and output of goods and
services.
• Short run – change in the variable of labor
• Long run – change in land & capital
Economics 4/13/11
http://mrmilewski.com
• OBJECTIVE: Examine supply elasticity.
• I. Journal #17 pt.A
-Read “The Global Economy” p.130
-Answer questions (1-2) p.130
• II. Journal#17 pt.B
-notes on the theory of production
• III. Journal#17 pt.C
-questions on film about innovation
• IV. Math Practice with Economics
Theory of Production
• The relationship between the factors of
production (land, labor, capital,
entrepreneurs) and output of goods and
services.
• Short run – change in the variable of labor
• Long run – change in land & capital
Law of Variable Proportions
• Stage I – Increasing returns
*output rises at an increasingly faster rate (each new
worker makes more than the previous worker did)
• Stage II – Diminishing returns
*output rises at a diminishing rate (each new worker
increases output, but not as much as the previous worker
did)
• Stage III – Negative returns
*output decreases as each new worker is added
Measure of Costs
• Fixed cost – the cost that a business incurs even if
the plant is idle and production is zero
-salaries to executives
-interest on bonds
-rent payments
-taxes
-depreciation
• Overhead – total fixed cost
• Variable costs – costs that change when output
changes
-hourly workers
-power
-freight charges
-raw materials
• Total costs – the sum of fixed and variable costs
• Turn to page 133
From Poop to Profits
• 1.) What is innovation? What does it have
to do with entrepreneurship?
• 2.) Why did Brad Morgan keep refining his
products and processes?
• 3.) Why do entrepreneurs need freedom?
• 4.) What do the farmer and the bookstore
owner have in common?
Economics 4/14/11
http://mrmilewski.com
• OBJECTIVE: Working with supply.
• I. Administrative Stuff
-attendance & follow ups
• II. Quiz#10
• III. Economics Lab
-Supply & Demand
• IV. Mindjogger
-video quiz on Chapter#5 Supply
• NOTICE: Chapter#5 Test Tomorrow!
Bell Schedule
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1st Hour 7:41 – 8:45
2nd Hour 8:50 – 9:55
3rd Hour 10:00 – 11:25
1st Lunch 10:00 – 10:25
2nd Lunch 10:30 – 10:55
3rd Lunch 11:00 – 11:25
Drill @ 11:30
Where will profits be maximized?
Directions
• 1.) Identify the factors of production in the
film.
• 2.) Identify the public goods in the film.
Economics 4/15/11
mrmilewski.com
• OBJECTIVE: Demonstration of Chapter#5 and begin
examination of price.
• I. Administrative Stuff
-attendance & distribution of test
• II. Chapter#5 Test
• III. Journal #18 pt.A
-Read “Business Week Newsclip” p.126
-Answer questions (1-2) p.126
• IV. Journal #18 pt.B
-notes on prices
• V. Journal#18 pt.C Film: I Pencil
The Week After Spring Break
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Monday 4/25/11 – No School
Tuesday 4/26/11 – Journal#19
Wednesday 4/27/11 – Journals#11-20 Due
Thursday 4/28/11 – ½ Day Conferences
Friday 4/29/11 – Prom Day
Saturday 4/30/11 – Hebda Cup
Schedule
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1st Hour:
2nd. Hour:
4th. Hour:
3rd. Hour:
1st. Lunch:
2nd. Lunch:
3rd. Lunch:
• 5th Hour:
• Assembly:
7:41 - 8:35 am
8:40 - 9:30 am
9:35 - 10:25 am
10:30 - 11:55 am
10:30 - 10:55 am
11:00 - 11:25 am
11:30 - 11:55 am
12:00 - 12:50 pm
1:00 - 2:15pm
How is price determined?
• Price is determined
by the intersection
of supply &
demand.
Prices as Signals
• Price – the monetary value of a product as
established by supply & demand.
• Price is a signal that helps us make
economic decisions.
• High prices are a signal for producers to
produce more and consumers to buy less.
• Low prices are a signal for producers to
produce less and consumers to buy more.
Advantages of Prices
• 1.) Prices in a competitive market favor
neither the producer nor the consumer.
• 2.) Prices in a market economy are
flexible.
• 3.) Prices have no administrative costs and
answer the questions WHAT, HOW, and
for WHOM to produce.
• 4.) You have known it your entire life.
Life without prices?
• Prices help allocate scarce resources, but
what if there was no such thing as price?
• Rationing – the government determines
everyone’s “fair” share.
• Problem with determining what is fair.
• High administrative stuff (cost,
enforcement, etc)
• No incentive to work hard.
I Pencil
Questions on “I Pencil”
• 1.) What does Milton Friedman mean by saying
there is nobody in the world who knows how to
make a pencil?
• 2.) What kind of transaction makes a free market
possible?
• 3.) What must be true for all parties in a
voluntary transaction?
• 4.) What is the price system?
• 5.) What is the zero-sum game philosophy?
• 6.) What is meant by the invisible hand?