Transcript Changes in Supply

Changes in Supply
Chapter 5 Section 3
Mr. Lopez
Per.4 Economics
Input Costs
Any change in the cost of an input used to
produce a good will affect supply
 A rise in the cost of an input will cause a
fall in supply at all price levels because the
good has become more expensive to
produce
 A fall in the cost of an input will cause an
increase in supply at all price levels

Effect of Rising Costs
Marginal Revenue vs. Marginal Cost
 Marginal Revenue: (price) the additional
income from producing one more unit of a
good

Marginal Cost: the cost of producing one
more unit of a good (includes price of
input)
-As supply increases it rises
 Technology helps lower production costs
and increases supply

Government’s Influence on Supply

Regulation: Govt. intervention in a market that
affects the price, quantity or quality of a good

The govt. can affect supply of many goods by
changing revenue or production through
subsidies and/or excise taxes
Government’s Influence on Supply

*SUBSIDIES: a govt. that supports a business or market
-given to protect a young industry
from strong foreign competition
-they allow the supply of a good
to increase by lowering marginal cost at all
levels of output

*EXCISE TAX: Tax on production or sale of a good
-increases production cost
-used to discourage the sale of goods who the
govt. believes is harmful to public health
Ex. Alcohol
Supply on Global Economy
It’s cheaper to produce a good in other
countries
 Do to govt. regulations, producers go to
other countries
 Other influences on Supply:
-Future Expectations of Prices
-Number of Suppliers

3 Critical Questions:

What role does the government play in
influencing supply?

What does excise tax do to the supply
curve? What does a subsidy do?

How does technology influence supply?
Answers:

1: The government can influence supply by
changing the revenue or production by providing
subsidies/excise taxes

2: It shifts the demand curve to the right and a
subsidy allows the supply of a good to increase
by lowering marginal cost at all levels of output

3: Technology influences supply by increasing the
rate of production and it’s cheaper for the
producer since they don’t have to pay for labor.