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# Law of supply

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### Law of supply

1. 1. What is the minimum, per hour I would have to pay you to work at Subway? Pretend there is no minimum wage and you could work for less than \$7.50
2. 2. Elastic or Inelastic?
3. 3. Elastic or Inelastic?
4. 4. Elastic or Inelastic?
5. 5. Elastic or Inelastic?
6. 6. Elastic or Inelastic?
7. 7. Graph subway workers on board • Jumping jacks market
8. 8. Law of Supply • As the price of a good increases, producers will produce more (,or try to) quantity. As the price of the good decreases, producers will produce less quantity. P Qs and P Qs The supply curve is always upward sloping \$ Q S
9. 9. For example…. • Average prices of • Therefore…..
10. 10. Graph one: A Supply Curve Price of Widgets Number of Widgets Sellers Want to Sell \$1.00 10 \$2.00 40 \$3.00 70 \$4.00 140
11. 11. Producer Surplus • Difference between cost and sale price • IOW: profit • Sale: \$15 • Cost: \$10 • PS = \$5
12. 12. For example….
13. 13. In your groups • Choose either a computer company or a car company • Your boss wants your group to figure out how to produce MORE of your goods per year • Consider every factor of production (land, labor, capital)
14. 14. If price changes Q*supply, What changes supply?
15. 15. 4 Determinants of Supply • Price of production + or - • Taxes, regulation, raw materials, labor
16. 16. 4 Determinants of Supply • Expectations of future price • If future P\$ might rise, hold inventory • If future P\$ might fall, increase supply
17. 17. 4 Determinants of Supply • Sellers (increase or decrease)
18. 18. 4 Determinants of Supply • Technology
19. 19. 4 Determinants of Supply Mnemonic • Price of Production • Expectations • Sellers (#) • Technology •PEST = supply determinants •TRIBE = demand determinants
20. 20. PEST Changes Assignment • For each part of PEST, identify one positive and negative change to the car or computer market and sketch a correctly drawn graph
21. 21. Diff between supply and Demand Xbox games • Supply or demand change? • Determinant
22. 22. Diff between supply and Demand Wheat • Supply or demand change? • Determinant locusts
23. 23. Diff between supply and Demand New cars • Supply or demand change? • Determinant
24. 24. Diff between supply and Demand Used clothing • Supply or demand change? • Determinant
25. 25. Diff between supply and Demand Dog food • Supply or demand change? • Determinant
26. 26. Diff between supply and Demand Dog food • Supply or demand change? • Determinant
27. 27. Diff between supply and Demand Salsa • Supply or demand change? • Determinant
28. 28. Diff between supply and Demand Salsa • Supply or demand change? • Determinant
29. 29. Diff between supply and Demand Salsa • Supply or demand change? • Determinant
30. 30. 1 change to Demand (TRIBE) • Choose 1 market • Xbox360s, pizza, Gatorade, hotel rooms 1 change to Supply (PEST)