1. Bellringer
03/28/2014
1. If the price of coffee is decreasing, how do you
predict firms will react?
2. Why are coffee shops more common now than it
was 5 years ago?
Starbucks Barista
Mr. Klein???
4. Many factors can affect supply of a
specific product or service.
What might cause a change in supply?
5. • When price changes, quantity
supplied will change. That is a
movement along the same supply
curve.
• When factors other than price
changes, supply curve will shift.
6. Four Major Determinants of Supply
Price of Inputs (production) increasing or
decreasing
Resources
Wages
Taxes / Regulations
If the price of inputs needed to make a
product drops, producers can supply
more at a lower production cost.
S₁
$ per
input
Q*Supplied
S₂
7. Four Major Determinants of Supply
Expectations of future price
If future P$ might rise, hold
inventory
If future P$ might fall, increase
supply
8. Four Major Determinants of Supply
Number of Firms in the Industry
In other words Sellers
Increase or Decrease
More sellers in the market
increase supply (vice versa)
9. Four Major Determinants of Supply
Technology
The use of science to
develop new products
and new methods for
producing / distributing
goods and services.
Improvements in tech
S
10. Four Major Determinants of Supply
Price of Production
Expectations
Sellers (Number)
Technology
PEST = supply determinants
TRIBE= demand determinants
11. PEST Assignment
Identify part of PEST (spelt out)
Graphically sketch the changes to the supply curve
Remember to Label your graphs
1. Price decreases (memory chips used to make computers)
2. Machines make new dog houses
3. Wages increases for a Computer Firm
4. Government imposes taxes on men’s ties
5. Future prices of production might fall (ipads)
6. Taxes decrease by 2% (pizza)
7. Metal goes up 10% (car industry)
8. More stores enter the market (DVD)
9. Rubber decreases in cost (shoe industry)
10. Make up your own example and show supply shift
$
Q
S