It includes the state of the weather and more broadly

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Unformatted text preview: broadly, the natural environment. Good weather can increase the supply of many agricultural products and bad weather can decrease their supply. Extreme natural events such as earthquakes, tornadoes, and hurricanes can also influence supply. Figure 3.5 illustrates an increase in supply. When supply increases, the supply curve shifts rightward and the quantity supplied at each price is larger. For example, at $1.00 per bar, on the original (blue) supply curve, the quantity supplied is 6 million bars a week. On the new (red) supply curve, the quantity supplied is 15 million bars a week. Look closely at the numbers in the table in Fig. 3.5 and check that the quantity supplied is larger at each price. Table 3.2 summarizes the influences on supply and the directions of those influences. An Increase in Supply FIGURE 3.5 Price (dollars per bar) is expected to rise, the return from selling the good in the future is higher than it is today. So supply decreases today and increases in the future. A' 25 30 15 20 35 10 Quantity supplied (millions of bars per week) 5 Original supply schedule New supply schedule Old technology New technology Quantity supplied Price ( dollars per bar) Quantity supplied Price (millions of bars per week) (dollars per bar) (millions of bars per week) A 0.50 0 A' 0.50 7 B 1.00 6 B' 1.00 15 C 1.50 10 C' 1.50 20 D 2.00 13 D' 2.00 25 E 2.50 15 E' 2.50 27 A change in any influence on sellers’ plans other than the price of the good itself results in a new supply schedule and a shift of the supply curve. For example, a new, cost-saving technology for producing energy bars changes the supply of energy bars. At a price of $1.50 a bar, 10 million bars a week are supplied when producers use the old technology (row C of the table) and 20 million energy bars a week are supplied when producers use the new technology (row C '). An advance in technology increases the supply of energy bars. The supply curve shifts rightward, as shown by the shift arrow and the resulting red curv...
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This note was uploaded on 04/04/2012 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.

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