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# Econ Ch5 Supply

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### Transcript

• 1. Chapter Supply 5
• 2. Chapter Objectives
• Students will learn:
• How the law of supply works.
• To apply it to simple situations.
• How the law of variable proportions applies to productivity.
• What factors cause a change in market supply.
• 3. Defining Supply
• Market: exchange between buyers and sellers of goods and services.
• Supply : the amount of goods and services that sellers are willing to sell at various prices at particular times.
• Demand : the amount of goods and services consumers are willing to buy at various prices at particular times.
• 4. The Law of Supply
• “ If all other things are equal, the higher the price of a product or service, the more of it suppliers will offer for sale .”
• The reverse is also true:
• “ The lower the price of a product or service, the less of it suppliers will offer for sale.”
• 5. Profit Motive:
• The law of supply is based on the profit motive.
• Can you explain how?
• Profit Motive:
• The desire of individuals and businesses to make money.
• 6. Graphing Supply
• Supply schedule: list of quantities supplied at various prices.
• Supply curve: points on a graph connected by line.
• 7. NOTICE: In what direction does the supply curve go?
• 8. Factors of Production
• Natural Resources
• Labor
• Capital Resources
• Suppliers use the factors of production to produce a product or service.
• A change in the amount of any of these resources can affect supply in the long run .
• Only labor can affect production in the short run .
• 9. The Law of Variable Proportions
• “In the short run, output or supply will change as one resource is varied, even though other resources do not change.”
• Relationship:
• Input of resources—supply of good or service
• 10. Marginal Product:
• Extra output or change in the total product caused by adding a worker.
• Why does adding a sixth worker increase the marginal product less?
• 11. Stages of Production
• 1 st stage: adding more workers results in more efficient use of tools and resources.
• 2 nd stage: Total product keeps growing but by smaller and smaller returns ( principle of diminishing returns ).
• 3 rd stage: Negative returns.
• 12. Marginal Product Simulation:
• Directions:
• Carry paperclips, one at a time, from the first container to the second, and from the second to the third, as quickly as possible, without running.
• Each paperclip must be set down and released into the container before it can be picked up and moved again.
• Each paperclip must be placed in all containers along the way.
1 2 3
• 13. Market Supply
• Sellers can be companies or individuals.
• Market supply =
• total output of all sellers within a market.
• 14. Changes in Market Supply
• Causes of shifts in supply:
• Productivity
• Taxes=costs more
• Subsidy=costs less
• Regulation=rules that control (Ex: FDA)
• Opinions=predicting the future
• Competition
• More sellers increase supply
• Fewer sellers decrease supply
• Supply Elasticity