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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? MANKIW CHAPTER 4 ALL WEEK Pretend there is no minimum wage and you could work for less than $7.50
  2. 2. 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 Q and P Q The supply curve is always upward sloping $ Q S
  3. 3. Push ups market: A Supply Curve Price of pushups Number of pushup Sellers 1 QE 2 QE 3 QE 4 QE 5 QE Graph on board
  4. 4. 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
  5. 5. For example…. • Average prices of • Therefore…..
  6. 6. For example….
  7. 7. Producer Surplus • Difference between cost and sale price • IOW: profit • Sale: $15 • Cost: $10 • PS = $5
  8. 8. If price changes Q*supply, What changes supply?
  9. 9. 4 Determinants of Supply • Price of production + or - • Taxes, regulation, raw materials, labor
  10. 10. 4 Determinants of Supply • Expectations • If future P$ might rise, hold inventory • If future P$ might fall, increase supply
  11. 11. 4 Determinants of Supply • Sellers (increase or decrease)
  12. 12. 4 Determinants of Supply • Technology
  13. 13. 4 Determinants of Supply Mnemonic • Price of Production • Expectations • Sellers (#) • Technology •PEST = supply determinants •TRIBE = demand determinants
  14. 14. Diff between supply and Demand Xbox games • Supply or demand change? • Determinant
  15. 15. Diff between supply and Demand Wheat • Supply or demand change? • Determinant locusts
  16. 16. Diff between supply and Demand New cars • Supply or demand change? • Determinant
  17. 17. Diff between supply and Demand Used clothing • Supply or demand change? • Determinant
  18. 18. Diff between supply and Demand Dog food • Supply or demand change? • Determinant
  19. 19. Diff between supply and Demand Dog food • Supply or demand change? • Determinant
  20. 20. Diff between supply and Demand Salsa • Supply or demand change? • Determinant
  21. 21. Diff between supply and Demand Salsa • Supply or demand change? • Determinant CLOSED
  22. 22. Diff between supply and Demand Salsa • Supply or demand change? • Determinant
  23. 23. Diff between supply and Demand Insurance plans • Supply or demand change? • Determinant
  24. 24. TRIBE Assignment due next Tuesday For each part of the: Formulate two scenarios and graph For example: Beef market Consumers see news story about mad cow disease

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