a While demand deals with a consumers supply deals with production b Supply the

A while demand deals with a consumers supply deals

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a) While demand deals with a consumers, supply deals with production b) Supply- the amount of some good or service a producer is willing to supply at each price c) Law of Supply- As the price of a good goes up, a larger quantity will be supplied by producers. As the price of a good goes down, a smaller quantity will be supplied by producers. 2) Impact of a Price Change Price of a slice of pizza ($) Slices of pizza made per day 1 5 2 30 3 60 4 100 5 150 6 210 3) Law of Supply: Movements along the Curve a) When prices change, there is only movement along the curve 4) Changes in Supply a) Remember, when the price of a good or service increases or decreases, we move along the supply curve b) But, what if something else changes? c) We will see what an increase or decrease in supply looks like d) Change in supply schedule P S ↓ Original S S ↑ 1 2 5 20 2 20 30 60 3 40 60 100 4 60 100 150 5 100 150 210 6 150 210 240
19 e) Shifts in Supply f) Note: The role of profit i) Profit is revenue (money in) minus cost (money out) ii) Generally speaking, anything which increases profit, CP, will cause an increase in supply and vice versa g) Supply Shifters i) Input Costs (1) As the price of inputs rise, the supply will decrease (2) If the price of crude oil increases and gas prices remain constant, then the oil refinery will supply less than they did previously ii) Number of Suppliers (1) As the number of suppliers increases, the total supply will increase iii) Expectations (mainly price expectations) (1) If a company expects the price of a good to rise in the near future, they may decrease supply now so that they can sell more in the future when the prices increase (if they do) iv) Price of alternative goods (produced by the firm) (1) Suppose Apple produces iPads and iPhones (2) If the price of an iPad goes up, the quantity supplied of iPads will go up but the supply of iPhones will fall v) Technology (1) If the available technology becomes better, then the supply will increase (2) If a factory switches from a manmade assembly line which can produce 100 goods each day to a machine-run line which can produce 300 goods each day (for the same cost), they supply more (from 100 300) (3) Difference between Input Cost and Technology (a) The input cost is cost of the input
20 (b) Technology measures efficiency or cost of resources vi) Taxes (1) Taxes work a lot like an additional cost (2) Higher taxes means companies will not earn as much (due to higher costs), thus will be less willing to supply their good or service (3) An increase in tax will decrease supply and vice versa h) REMINDER i) Important Notes ii) These are called the supply shifters iii) Do not overthink these one step at a time iv) These conditions cause the entire curve to shift because demand is affected at every price level v) SUPPLY- is used when we are referring to the entire curve vi) QUANTITY SUPPLIED- is used when we are referring to a single curve and the multiple price/quantity combinations 3.3 Putting Supply and Demand Together 1) Interlude a)

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