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Economics
Changes in Quantity Supplied Changes Along a Supply Curve
Change in quantity supplied does not shift the supply curve○ movement to right means increase in price
and quantity supplied○ movement to left means decrease in price
and quantity suppliedMarket supply curves show larger changes
than individual curves
Changes in quantity supplied do not shift the position of the supply curve. Why?
Changes in Supply
Change in supply—producers offer different amounts at every price
As production costs rise, supply drops; as costs drop, supply rises
Change in supply shifts the supply curve Six factors cause change in supply
Changes in Supply
Factor 1: Input CostsInput costs—price of resources needed to
produce good or service○ if price of resource increases, costs
increase○ if price of resource decreases, costs
decrease
Changes in Supply
Factor 2: Labor ProductivityLabor productivity—amount of product
worker can produce in set timeRise in productivity lowers production costs;
supply increasesSpecialization can allow producer to make
more goods at lower costBetter-trained workers produce more in less
time; decrease costs
Changes in Supply
Factor 3: TechnologyTechnology—use of scientific methods,
discoveries in production○ results in new products or manufacturing
techniquesManufacturers use technology to make
goods more efficientlyTechnology enables workers to be more
productive
Changes in Supply
Factor 4: Government ActionExcise tax—tax on production or sale of specific
good or service○ often placed on items that government wants to
discourage use of○ taxes increase producers’ costs; decrease supply
Regulation—set of rules, laws designed to control business behavior○ examples: banning use of certain resources,
worker safety laws
Changes in Supply
Factor 5: Producer ExpectationsProducers have expectations about future price of
their product○ expectations affect how much they will supply at
presentExpectations of higher price in future may lead to
different actions○ Farmer may withhold part of current crop and
decrease supply○ Manufacturer may buy more equipment to increase
future supply
Changes in Supply
Factor 6: Number of ProducersWhen one producer has successful new
idea, others enter the market○supply of good or service increases
Increase in number of producers leads to increased competition○may drive less-efficient producers out
of market
Questions Complete the chart below.
Factor That Changes Supply Reason Why Supply Changes
Questions1. How do each of these examples of government actions affect
the supply of gasoline?
a. In 2005, the government continued support for ethanol, a gasoline substitute.
b. The state of California requires a special blend of gasoline that meets stricter environmental standards than other regions in the country.
c. Many state use gasoline taxes to help fund highway construction and maintenance.
Questions
Why do you think governments want to influence the supply of alcohol and tobacco products by imposing excise taxes?
Questions
Complete the chart below for a manufacturer of MP3 players.
Example Change That Affects Supply Factor and How It Affected Supply
You give each worker in your factory a specialized job
Price of computer chips used in MP3 players rises
New machinery speeds up the manufacturing process
Your success prompts three new companies to start producing MP3 players
A new law requires producers to recycle the wastewater from their factories.