The document discusses the law of supply and factors that cause the supply curve to shift. It explains that the law of supply states that quantity supplied rises with price, as higher prices increase producer profits and allow firms to cover higher costs. It then provides examples of factors that can cause the supply curve to shift left or right, such as changes in input costs, technology, taxes, subsidies, and expectations about future prices. Government regulations can also impact supply.

2.  The law of supply - as the price of a good
rises, its quantity supplied will rise, and vice
versa.
 Why do producers produce more output
when prices rise?
 They seek higher profits
 They can cover higher marginal costs of
production

3.  The Law of Supply states
that the quantity of a
good supplied varies P
directly with its price. S
$25
 Up sloping curve
represents this direct 20
relationship.
 More product will be
offered for sale at a high
price than at a low price
(they always run out on
good sales) 10 20 QS

4.  What is the difference between a change in
quantity demand and a change in demand?
 Change in quantity demand is caused by a
change in price (movement along curve). A
change is demand is caused by something
other then price (shift in the curve).

5. S0
B
Price (per unit)
Change in quantity
A supplied (a movement
$15
along the curve)
1,250 1,500
Quantity supplied (per unit of time)

6.  S1 - Movement of S2
P
curve to right S
indicates an increase S1
in supply
 S2 - Movement of
curve to left indicates
a decrease in supply
Q

8.  Cause a change in supply

9.  When costs go up, profits go down, so that
the incentive to supply also goes down.

10.  Advances in technology or productivity
reduce the number of inputs needed to
produce a given supply of goods.
 Costs go down, profits go up, leading to
increased supply.

11.  When taxes go up, costs go up, and profits go
down, leading suppliers to reduce output.
 When government subsidies go up, costs go
down, and profits go up, leading suppliers to
increase output.

12.  Increased government regulations decreases
supply
 Government mandates of new auto saftey
features like air bags increases the cost of
production.

13.  If suppliers expect prices to rise in the
future, they may store today's supply to reap
higher profits later.

14.  As more people decide to supply a good the
market supply increases

15.  What happens and why to the supply curve for cars in the
following situations (Show a graph and state reason).
 Cost of materials used to make cars increases.
 New training methods improve worker efficiency.
 An innovative process for making cars is introduced.
 Car producers think the price of a car will increase in the near future.
 The leading car producer goes out of business
 The government mandates tighter emission control tests