economics supply
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economics supply

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economics supply economics supply Presentation Transcript

  • Supply
  • Supply Individuals control the factors ofproduction – inputs, or resources,necessary to produce goods. Individuals supply factors of production tointermediaries or firms.
  • Supply The analysis of the supply of producedgoods has two parts:– An analysis of the supply of the factors ofproduction to households and firms.– An analysis of why firms transform thosefactors of production into usable goods andservices.
  • The Law of Supply There is a direct relationship betweenprice and quantity supplied. Quantity supplied rises as price rises, otherthings constant. Quantity supplied falls as price falls, otherthings constant.
  • Law of SupplyLaw of Supply As the price of a product rises, producers will bewilling to supply more. The height of the supply curve at any quantityshows the minimum price necessary to induceproducers to supply that next unit to market. The height of the supply curve at any quantityalso shows the opportunity cost of producing thenext unit of the good.
  • The Law of Supply The law of supply is accounted for by twofactors:– When prices rise, firms substituteproduction of one good for another.– Assuming firms’ costs are constant, ahigher price means higher profits.
  • SAQuantity supplied (per unit of time)0Price(perunit)PAQAA Sample Supply Curve
  • Supply Curve DVDs
  • Change in quantitysupplied (a movementalong the curve)Change in Quantity SuppliedPrice(perunit)Quantity supplied (per unit of time)S0$15A1,250 1,500B
  • Shift in SupplyPrice(perunit)Quantity supplied (per unit of time)S0Shift in Supply(a shift of the curve)S1$15A B1,250 1,500
  • Shift Factors of Supply Other factors besides price affect howmuch will be supplied: Prices of inputs used in the production of agood. Technology. Suppliers’ expectations. Taxes and subsidies.