4 Supply
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4 Supply

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4 Supply 4 Supply Presentation Transcript

  • Supply Like demand, but different.
  • Objectives •What is supply and how does it illustrate price effect? •What is the difference between the price effect and a change in supply?
  • Think of the things you do to earn money. Would you be as willing to supply your time to do them if you were paid nothing for your efforts?
  • What is supply? The various amounts of something a producer is willing and able to sell at different possible prices at a particular time.
  • What happens to your cost of production as you make more of something? What is the incentive of producing if it is more expensive? Marginal cost vs. Marginal benefit
  • As long as the price of the next (marginal) unit covers the marginal cost, the producer will make money and has incentive to produce more. What does that mean?
  • The Law of Supply As the price of a good or service increases, the quantity of goods or services offered by suppliers increases and vice versa.
  • Price Elasticity of Supply What’s it mean? Change in price of good/service --> change in quantity supplied
  • • Elastic supply means that a change in price results in a large change of supply • Characteristics? • Inelastic supply means that a change in price results in a small change of supply • Characteristics? • What does that look like graphically?
  • Examples • Gasoline production • Airplane production • Fast food restaurants • Lemonade stand • How can you tell if something is elastic or inelastic?
  • Trying to Decide If Something is Elastic or Inelastic? •Look at the situation • Look at the graph •Easy to bring new • Steep slope = resources into inelastic production in • Gradual slope = elastic response to a higher price? That is elastic. •The opposite is inelastic.
  • What Changes Supply? • Price? • NO! Change in price is a movement on the curve. There are 3 things that can change the supply curve…
  • Changes in the marginal cost of production • Better technology, production methods, more efficient workers etc.
  • Changes in the number of sellers or producers • When new businesses enter a market, supply increases.
  • Change in expectations • If producers expect higher future prices for their products, they may change their supplies today.
  • Exit Ticket quot;Name two ways that supply and demand are similar and two ways they are different.quot;