Similarly a rise in the minimum wage decreases the

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: um wage decreases the supply of hamburgers. Prices of Related Goods Produced The prices of related goods that firms produce influence supply. For example, if the price of energy gel rises, firms switch production from bars to gel. The supply of energy bars decreases. Energy bars and energy gel are substitutes in production—goods that can be produced by using the same resources. If the price of beef rises, the supply of cowhide increases. Beef and cowhide are complements in production—goods that must be produced together. 9160335_CH03_p053-080.qxd 62 6/22/09 8:56 AM Page 62 CHAPTER 3 Demand and Supply Expected Future Prices If the price of a good The Number of Suppliers The larger the number of firms that produce a good, the greater is the supply of the good. And as firms enter an industry, the supply in that industry increases. As firms leave an industry, the supply in that industry decreases. mean the way that factors of production are used to produce a good. A technology change occurs when a new method is discovered that lowers the cost of producing a good. For example, new methods used in the factories that produce computer chips have lowered the cost and increased the supply of chips. Changes in the influences on producers’ planned sales bring either a change in the quantity supplied or a change in supply. Equivalently, they bring either a movement along the supply curve or a shift of the supply curve. A point on the supply curve shows the quantity supplied at a given price. A movement along the supply curve shows a change in the quantity supplied. The entire supply curve shows supply. A shift of the supply curve shows a change in supply. 2.50 E 2.00 E' D' D C' C B' B 0.50 A 0 Supply of energy bars (new) Supply of energy bars (original) 1.00 The State of Nature The state of nature includes all A Change in the Quantity Supplied Versus a Change in Supply 3.00 1.50 Technology The term “technology” is used broadly to the natural forces that influence production. It includes the state of the weather and, more...
View Full Document

Ask a homework question - tutors are online