Transcript Supply - Images

Economics
Supply
 Supply:
 Quantity
of goods/services that
producers are willing/able to
make at various prices
Supply
 Quantity Supply:
 Amount
of a good/service that a
producer is willing/able to make
at a specific price
Law of Supply
 States:
 that
producers supply more
goods and services when they
can sell them at higher prices and
fewer goods and services when
they must sell them at lower
prices.
Supply
 What causes producers to vary their
supply of goods/services?
 1.
Profit Motive (profit)
 How much they make after all their
bills and cost of production have
been paid
Profit

2.
Profit Competitors
 If a company’s competitor
makes a profit off of a
product, they too will supply
a similar product
Illustrating Supply
 Supply schedule: table
 Supply curve: graph
Elasticity of Supply
 Degree
to which price change affects
quantity supplied
 Types:
 1. Elastic Supply:
 When small change in price has a
huge impact on supply
Elasticity of Supply
 Types of products:
Made
quickly
Cheap in price
Takes only a few products to
make
 Sports team merchandise after a
big victory
Inelastic Supply
 Inelastic
Supply
 When price change has little
impact on supply
Inelastic Supply
Types
of products
 Lengthily to produce
 Expensive to produce
 Resources are hard to find
Ex.
Precious metals, land
Changes in Supply
 Supply shifts
of supply – nonprice factors that can shift the
entire supply curve of a product
Instead of simply changing the
quantity supplied along the
original supply curve.
 Determinants
Determinants
 Price of resources
 Government tools
 Technology
 Competition
 Prices of related goods
 Producer expectations
Prices of Resource
 Used in the production of a good or
service.
 Price of a resource falls, production
cost falls
Government tools
 Taxes
 Materials
 Property
Higher
the tax higher the cost
of production
Government tools
 Subsidies
 Payments
to private business by
the government.
 Regulations
 Rules on how companies conduct
business
Pollution laws
Technology
 Can lower the cost of production
 Competition
 Tends
to increase supply, while a
lack of competition tends to
decrease supply
Prices of Related Goods
 The supply for one good often is
connected to the supply for its
related good.
 Wheat and corn
Producer expectations
 Decisions based on their expected
future income.
Total Output
 How much of a product a company can
produce in a specific time period
 To
maximize productivity businesses
need to know their marginal product
(output)
Marginal Product
 Marginal Product (output)
 Change
of output generated by
adding one more unit of input
Theory of the Law of Diminishing
Return
 As more of a variable resource is
added to a given amount of fixed
resources, marginal product
eventually declines and could be
negative.
Production Cost
.
Fixed Cost:
Cost that seldom change for
the producer, even as
production increases.
Ex:
rent, interest, taxes, etc.
Variable Cost:
 Variable Cost:
Cost
that can change as
production increases
 Ex:
materials, paid wages