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# 3 law of supply

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### 3 law of supply

1. 1. In your notes: 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 \$7.85
2. 2. Graph subway workers on board • Jumping jacks market
3. 3. 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
4. 4. For example…. • Average prices of • Therefore…..
5. 5. 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
6. 6. Producer Surplus • Difference between cost and sale price • IOW: profit • Sale: \$15 • Cost: \$10 • PS = \$5
7. 7. For example….
8. 8. 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)
9. 9. If price changes Q*supply, What changes supply?
10. 10. 4 Determinants of Supply • Price of production + or – • Resources • Taxes • regulation
11. 11. 4 Determinants of Supply • Expectations of future price • If future P\$ might rise, hold inventory • If future P\$ might fall, increase supply
12. 12. 4 Determinants of Supply • Sellers (increase or decrease)
13. 13. 4 Determinants of Supply • Technology
14. 14. 4 Determinants of Supply Mnemonic • Price of Production • Expectations • Sellers (#) • Technology •PEST = supply determinants •TRIBE = demand determinants
15. 15. PEST Changes Assignment 1. For each part of PEST, identify one positive and negative change to the car or computer market and sketch a correctly drawn graph 2. Find an article either on your phone or in a financial magazine, write the headline, the market, part of PEST that is changing and graph it.