Transcript Understanding Supply

Understanding Supply
Economics
Economic Market
• Market: Any place where people come
together to buy and sell goods or
services
• An economic market has two sides:
• The buying side is referred to as demand
• The selling side is referred to as supply
• P = Price, Q = quantity, Qs = quantity
supplied, Δ = change
What is Supply?
• The willingness and ability of
sellers to produce and offer to sell
different quantities of a good at
different prices during a specific time
period.
• Willingness refers to a sellers desire to
sell
• Ability refers to a sellers capability to
sell
What is Supply?
• Ex: Joe is willing to make and sells
shoes. However, Joe does not
know how (have the ability) to
make shoes.
• Outcome: Joe cannot supply shoes
What is Supply?
• Push up scenario
• How many push ups are you
WILLING and ABLE to do for
•
•
•
•
$1
$2
$3
$5
What is the Law of Supply?
• Law of Supply:
• A law stating that as the price of a good
increases, the quantity supplied of the
good increases, and as the price of a
good decreases, the quantity supplied
of the good decreases (direct
relationship).
• If P ↑up then Qs up ↑
• If P ↓ down then Qs down ↓
Quantity supplied
• The number of units of a good
produced and offered for sale at a
specific price.
• Ex: A seller offers five hot dogs at $2. Five
is the quantity supplied at that price.
Supply Schedule
Price
Quantity Supplied
1
12
2
28
3
42
4
52
5
60
• A numerical chart
illustrating the law of
supply
• Notice the
representation of the
law of supply
Supply Curve
• A graph that shows
the amount of a
good sellers are
willing and able to
sell at various prices
• Price is always on
the vertical axis.
• Quantity supplied
is always on the
horizontal axis.
The Supply Curve Shifts
• When supply
increases, the
curve shifts right.
• When supply
decreases, the
curve shifts left.
Vertical Supply Curve
30
20
10
0
0 10 20 30 40 50 60 70
• This exists in a situation
where there are a
limited amount of a
good or service
• Vertical supply curve
indicates a change in
price will have no effect
on the quantity
supplied.
• Ex: Theater tickets;
stadium tickets, certain
antiques
What Factors Cause Supply
Curves to Shift?
WIGNET
• Weather
• Inputs (Resource Prices)
• Government
• Number of Sellers
• Expectations of Future Prices
• Technology
What Factors Cause Supply
Curves to Shift?
• Weather:
• Ex: a hurricane wrecks sugarcane fields in the
Caribbean. Therefore, the cost of sugar increases.
• Inputs (Resource Prices):
• Land, labor, and capital
• Government
• Taxes: Taxes on the per-unit costs (avg. cost of a good)
increase or decrease
• Subsidies: A financial payment made by the
government
• Quotas: A legal limit on the number of units of a foreign
produced good (import) that can enter the country
What Factors Cause Supply
Curves to Shift?
• Number of Sellers:
• More or fewer sellers enter the market
• Expectations of Future Prices:
• Prices are expected to increase or decrease
• Technology:
• The ability to produce more output with a fixed
amount of resources
Change in Supply
vs.
Change in Quantity Supplied
S1
S2
• A change in supply
refers to a shift in the
supply curve.
• This can be brought on
by 6 possible factors /
shifters
Change in Supply
vs.
Change in Quantity Supplied
S1
B
A
• A change in quantity
supplied refers to a
movement along a
given supply curve.
• This is brought on
ONLY by a change in a
good’s price
Assignment
• Supply Headlines