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Supply<br />It’s Just Like Demand, but Different<br />
Changing Roles<br />Remember today we are talking about supply (and not demand).  So you need to think about things as if ...
What is Supply?<br />Supply is how much a firm is willing and able to sell at every given price, ceteris paribus<br />Thus...
Law of Supply<br />Law of Supply - the price of a product (or service) is directly related to the quantity supplied, ceter...
Supply Schedules and Curves<br />Supply Schedule - a table showing the relationship between the price of a good and the qu...
Supply Schedule<br />
Supply Schedule<br />
Supply Schedule<br />
Supply Schedule<br />
Supply Curve - a diagram showing the relationship between the price of a good and the quantity supplied per period of time...
Supply Curve<br />
Supply Curve<br />P($)<br />Remember to ALWAYS label<br />your axes!<br />Qs per month<br />
Supply Curve<br />P($)<br />20<br />15<br />10<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
Supply Curve<br />P($)<br />A<br />20<br />15<br />10<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
Supply Curve<br />P($)<br />A<br />20<br />B<br />15<br />10<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
Supply Curve<br />P($)<br />A<br />20<br />B<br />15<br />10<br />C<br />5<br />Qs per month<br />0<br />5<br />10<br />15...
Supply Curve<br />P($)<br />S<br />A<br />20<br />B<br />15<br />10<br />C<br />5<br />Qs per month<br />0<br />5<br />10<...
Market Supply Curve<br />Just like it was for Demand, adding “Market” to the front simply means we are now talking about a...
Market Supply Schedule<br />
Change in S vs. Change in Qs<br />Change in Supply - a shift of the supply curve<br />Change in Quantity Supplied (DQs) - ...
Increase in Supply<br />P<br />Qs<br />
Increase in Supply<br />S<br />P<br />Qs<br />
Increase in Supply<br />S<br />P<br />Qs<br />
Increase in Supply<br />S<br />P<br />S’<br />Qs<br />
Increase in Qs<br />
Increase in Qs<br />P($)<br />Qs per month<br />
Increase in Qs<br />S<br />P($)<br />Qs per month<br />
Increase in Qs<br />S<br />P($)<br />A<br />Qs per month<br />
Increase in Qs<br />S<br />P($)<br />A<br />Qs per month<br />
Increase in Qs<br />S<br />P($)<br />B<br />A<br />Qs per month<br />
Changes in Supply<br />Just like for demand there are a list of the “Determinants of Supply”<br />These are the things tha...
Price of Relevant Resources<br />If the cost of the resources used to make a product change in price.  Then supply will ch...
Resource Price Decrease<br />So, before the cost decrease, at a price of  $20 the firm was willing to make 15 CDs. If cost...
Supply Curve<br />P($)<br />A<br />20<br />15<br />A’<br />10<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
Resource Price Decrease<br />Thus the firm is willing to supply every quantity at a lower price.<br />Or in other words, a...
Supply Curve Shift<br />Old Supply Curve<br />P($)<br />A<br />20<br />15<br />A’<br />New Supply Curve<br />10<br />5<br ...
Obviously the reverse is also true.  <br />In increase in the cost of plastic (used in making CDs, makes it more expensive...
Resource Price Increase<br />So, before the cost increase, at a price of  $15 the firm was willing to make 7 CDs. If costs...
Supply Curve<br />P($)<br />B’<br />20<br />B<br />15<br />10<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
Resource Price Increase<br />Thus the firm is willing to supply every quantity at a higher price.<br />Or in other words, ...
Supply Curve Shift<br /> New Supply Curve<br />P($)<br />Old Supply Curve<br />B’<br />20<br />B<br />15<br />10<br />5<br...
Technology<br />Similarly changes in technology can change supply<br />Improvement in technology lowers costs<br /><ul><li...
Changes in Supply<br />Number of Sellers<br />More sellers in the market means more quantity is being supplied at every pr...
Firm would prefer to sell today when price is higher
Remember, they want to make as much money as they can.</li></li></ul><li>Expectations of Future Prices<br />Firms expect p...
Firm would prefer to wait until the good can be sold for a higher price</li></li></ul><li>Changes in Supply<br />Taxes<br ...
Changes in Supply<br />Availability of Credit <br />How easy it is to borrow money affects supply.<br />If interest rates ...
Elasticity of Supply<br />Is a measure of how Suppliers will respond to changes in the market.<br />Operates exactly like ...
Increase in Supply<br />
Increase in Supply<br />P<br />Qs<br />
Increase in Supply<br />S<br />P<br />Qs<br />
Increase in Supply<br />S<br />P<br />Qs<br />
Increase in Supply<br />S<br />P<br />S’<br />Qs<br />
Increase in Qs<br />
Increase in Qs<br />P($)<br />Qs per month<br />
Increase in Qs<br />S<br />P($)<br />Qs per month<br />
Increase in Qs<br />S<br />P($)<br />A<br />Qs per month<br />
Increase in Qs<br />S<br />P($)<br />A<br />Qs per month<br />
Increase in Qs<br />S<br />P($)<br />B<br />A<br />Qs per month<br />
Supply 1
Supply 1
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Supply 1

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Supply curve

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Transcript of "Supply 1"

  1. 1. Supply<br />It’s Just Like Demand, but Different<br />
  2. 2. Changing Roles<br />Remember today we are talking about supply (and not demand). So you need to think about things as if you were a business trying to make the most money possible.<br />You are NOT a consumer trying to save money.<br />PROFIT! PROFIT! PROFIT! PROFIT!<br />
  3. 3. What is Supply?<br />Supply is how much a firm is willing and able to sell at every given price, ceteris paribus<br />Thus, if all else remains the same and the price of a good goes up, what would you expect the response of a firm to be?<br />To produce more, since prices are going up, so will profits<br />
  4. 4. Law of Supply<br />Law of Supply - the price of a product (or service) is directly related to the quantity supplied, ceteris paribus.<br />Quantity Supplied - the amount of a good (or service) produced by firms at a particular price.<br />
  5. 5. Supply Schedules and Curves<br />Supply Schedule - a table showing the relationship between the price of a good and the quantity supplied per period of time, ceteris paribus.<br />
  6. 6. Supply Schedule<br />
  7. 7. Supply Schedule<br />
  8. 8. Supply Schedule<br />
  9. 9. Supply Schedule<br />
  10. 10. Supply Curve - a diagram showing the relationship between the price of a good and the quantity supplied per period of time, ceteris paribus.<br />Supply Schedules and Curves<br />
  11. 11. Supply Curve<br />
  12. 12. Supply Curve<br />P($)<br />Remember to ALWAYS label<br />your axes!<br />Qs per month<br />
  13. 13. Supply Curve<br />P($)<br />20<br />15<br />10<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
  14. 14. Supply Curve<br />P($)<br />A<br />20<br />15<br />10<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
  15. 15. Supply Curve<br />P($)<br />A<br />20<br />B<br />15<br />10<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
  16. 16. Supply Curve<br />P($)<br />A<br />20<br />B<br />15<br />10<br />C<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
  17. 17. Supply Curve<br />P($)<br />S<br />A<br />20<br />B<br />15<br />10<br />C<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
  18. 18. Market Supply Curve<br />Just like it was for Demand, adding “Market” to the front simply means we are now talking about all firms in the market<br />So, a Market Supply Schedule and a Market Supply Curve would be what?<br />
  19. 19. Market Supply Schedule<br />
  20. 20. Change in S vs. Change in Qs<br />Change in Supply - a shift of the supply curve<br />Change in Quantity Supplied (DQs) - movement along a supply curve<br /><ul><li>A change in quantity supplied can only be caused by a change in the price of the good</li></li></ul><li>Increase in Supply<br />
  21. 21. Increase in Supply<br />P<br />Qs<br />
  22. 22. Increase in Supply<br />S<br />P<br />Qs<br />
  23. 23. Increase in Supply<br />S<br />P<br />Qs<br />
  24. 24. Increase in Supply<br />S<br />P<br />S’<br />Qs<br />
  25. 25. Increase in Qs<br />
  26. 26. Increase in Qs<br />P($)<br />Qs per month<br />
  27. 27. Increase in Qs<br />S<br />P($)<br />Qs per month<br />
  28. 28. Increase in Qs<br />S<br />P($)<br />A<br />Qs per month<br />
  29. 29. Increase in Qs<br />S<br />P($)<br />A<br />Qs per month<br />
  30. 30. Increase in Qs<br />S<br />P($)<br />B<br />A<br />Qs per month<br />
  31. 31. Changes in Supply<br />Just like for demand there are a list of the “Determinants of Supply”<br />These are the things that will cause a change in Supply.<br />
  32. 32. Price of Relevant Resources<br />If the cost of the resources used to make a product change in price. Then supply will change.<br />Let’s say the cost of plastic (used in making CDs) decreases. What will happen to the supply of CDs?<br />CD Supply will go up, because it is now cheaper to make CD’s at every price.<br />Changes in Supply<br />
  33. 33. Resource Price Decrease<br />So, before the cost decrease, at a price of $20 the firm was willing to make 15 CDs. If costs go down, will the firm still need $20 to make them want to supply 15 CDs?<br />No, in order to make the same profit they are willing to take a lower price <br />
  34. 34. Supply Curve<br />P($)<br />A<br />20<br />15<br />A’<br />10<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
  35. 35. Resource Price Decrease<br />Thus the firm is willing to supply every quantity at a lower price.<br />Or in other words, at every price the firm is willing to supply more of the good<br />In summary, if the price of a resource goes down, supply increases (shifts to the right)<br />
  36. 36. Supply Curve Shift<br />Old Supply Curve<br />P($)<br />A<br />20<br />15<br />A’<br />New Supply Curve<br />10<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
  37. 37. Obviously the reverse is also true. <br />In increase in the cost of plastic (used in making CDs, makes it more expensive to make every quantity of CDs<br />Price of Relevant Resources<br />
  38. 38. Resource Price Increase<br />So, before the cost increase, at a price of $15 the firm was willing to make 7 CDs. If costs go up, will the firm still need $15 to make them want to supply 7 CDs?<br />No, in order to make the same profit they are going to need a higher price to cover the higher costs <br />
  39. 39. Supply Curve<br />P($)<br />B’<br />20<br />B<br />15<br />10<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
  40. 40. Resource Price Increase<br />Thus the firm is willing to supply every quantity at a higher price.<br />Or in other words, at every price the firm is willing to supply less of the good<br />In summary, if the price of a resource goes up, supply decreases (shifts to the left)<br />
  41. 41. Supply Curve Shift<br /> New Supply Curve<br />P($)<br />Old Supply Curve<br />B’<br />20<br />B<br />15<br />10<br />5<br />Qs per month<br />0<br />5<br />10<br />15<br />
  42. 42. Technology<br />Similarly changes in technology can change supply<br />Improvement in technology lowers costs<br /><ul><li>Lower cost of production increases Supply</li></ul>Worsening of technology increases costs<br /><ul><li>Higher cost of production decreases Supply</li></ul>Changes in Supply<br />
  43. 43. Changes in Supply<br />Number of Sellers<br />More sellers in the market means more quantity is being supplied at every price<br /><ul><li>Increase in supply of the good</li></ul>Less sellers in the market means less quantity is being supplied at every price<br /><ul><li>Decrease supply of the good</li></li></ul><li>Changes in Supply<br />Expectations of Future Prices <br />Similarly to demand, what firms think will happen to prices in the future will effect supply now.<br />If Firms expect price of their good to decrease in the future what will happen?<br /><ul><li>Supply increases today
  44. 44. Firm would prefer to sell today when price is higher
  45. 45. Remember, they want to make as much money as they can.</li></li></ul><li>Expectations of Future Prices<br />Firms expect price of their good to increase in the future<br /><ul><li>Supply decreases today
  46. 46. Firm would prefer to wait until the good can be sold for a higher price</li></li></ul><li>Changes in Supply<br />Taxes<br />Changes in tax rates can also affect supply<br />An Increase in tax on the good decreases supply. Why?<br /><ul><li>Raises the cost of production</li></ul>Decrease in tax on the good increases supply.<br /><ul><li>Lowers the cost of production</li></li></ul><li>Subsidies<br />A subsidy is an amount the paid to the producer for each unit of a good produced<br />Adding or removing subsidies changes supply.<br />Increase in subsidy on a good increases supply. Why?<br /><ul><li>Lowers the costs of production</li></ul>Decrease in Subsidy on the Good Decreases Supply<br /><ul><li>Raises the costs of production</li></ul>Changes in Supply<br />
  47. 47. Changes in Supply<br />Availability of Credit <br />How easy it is to borrow money affects supply.<br />If interest rates are low, then it is easier for the firm to borrow money and thus supply will do what?<br />Supply increases<br />If interest rates are high, it is more difficult for the firm to borrow money and thus supply does what?<br />Supply decreases<br />
  48. 48. Elasticity of Supply<br />Is a measure of how Suppliers will respond to changes in the market.<br />Operates exactly like Elasticity of Demand<br />Inelastic - price changes have little of no effect on supply<br />Elastic – price changes have dramatic effect of supply<br />Just like with Demand, Time changes most things to elastic<br />
  49. 49. Increase in Supply<br />
  50. 50. Increase in Supply<br />P<br />Qs<br />
  51. 51. Increase in Supply<br />S<br />P<br />Qs<br />
  52. 52. Increase in Supply<br />S<br />P<br />Qs<br />
  53. 53. Increase in Supply<br />S<br />P<br />S’<br />Qs<br />
  54. 54. Increase in Qs<br />
  55. 55. Increase in Qs<br />P($)<br />Qs per month<br />
  56. 56. Increase in Qs<br />S<br />P($)<br />Qs per month<br />
  57. 57. Increase in Qs<br />S<br />P($)<br />A<br />Qs per month<br />
  58. 58. Increase in Qs<br />S<br />P($)<br />A<br />Qs per month<br />
  59. 59. Increase in Qs<br />S<br />P($)<br />B<br />A<br />Qs per month<br />
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