Supply- Amount of a good or service that a producer is willing to sell at each particular price -Law...
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Supply- Amount of a good or service that a producer is willing to sell at each particular price -Law of Supply- the higher the price, the larger the quantity
Supply- Amount of a good or service that a producer is willing
to sell at each particular price -Law of Supply- the higher the
price, the larger the quantity produced P = QS
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Supply Schedule- lists how much of a good a supplier will offer
at different prices Market Supply Schedule- lists how much of a
good ALL suppliers will offer at different prices
Slide 3
Price of SmoothieSmoothies supplied per day $110 $220 $330 $440
Supply Schedule
What causes producers to vary their supply of goods &
services PROFIT - producers actions are based on the pursuit of
profit - Amount of money remaining after producers have paid all of
their costs - Make a profit when incoming revenues are greater than
costs of production
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Production Costs *O perating Cost- cost of operating a facility
(factory or store) 1. Fixed Cost- cost that doesn't change E
xamples: rent, interest on loans, property insurance premiums,
local and state property taxes, and salaries Overhead - Total Fixed
Costs
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2. Variable Cost- cost that rises or falls depending on how
much is produced - Examples: raw materials, wages, etc 3. Total
Cost = fixed cost + variable cost 4. Marginal Cost- cost of
producing one more unit of a good
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Prices for sports team memorabilia may increase during a
successful season. How does this increase reflect the law of
supply?
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Supply Shifts REMEMBER A CHANGE IN PRICE IS ALWAYS A MOVEMENT
ALONG THE CURVE
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Determinants of Supply 1. Price of Resources 2. Government
Tools 3. Technology 4. Competition 5. Price of Related Goods 6.
Producer Expectations
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Price of Resources Resource: anything that is used in the
production of a good or service - ex: wages, electricity, raw
materials
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Government Tools Tax: required payment of money to the
government to help fund government services - Businesses pay taxes
on the materials, property and profit - EX. Higher Taxes,
businesses are faced with higher costs of production &
prospects of making less profit & will supply less of their
product, supply curve will shift to the ________
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Subsidies: payments to private businesses by the government ex.
Wheat Excise Tax: are taxes paid when purchases are made on a
specific good ex. Gasoline, Tobacco Government Tools
Slide 18
Technology Can have a powerful impact on supply, such as a new
tool or chemical process New technology makes the production more
efficient and less expensive New automatic espresso machines have
made the process of producing drinks at Starbucks more efficient
and very fast.
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Competition Competition tends to increase supply Lack of
competition tends to decrease supply
Slide 21
Another example of Competition: Recently a Cold Stone Creamery
was put up next to a local ice cream shop in Wadena. Cold Stone
Creamery Local Ice Cream Shop
Slide 22
Price of Related Goods Supply for one good often is connected
to the supply for its related goods Change in a products price can
affect the supply for the products related goods The price of cocoa
has risen tremendously in the past few weeks. What impact will this
have on the supply of mocha based drinks?
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Producers Expectations Supply will vary on the expectations of
the producer Good expectations = good supply, bad expectations =
low supply Summer weather is coming soon. McDonalds is aware of
this & wants to change their McCafe menu. What will McDonalds
do to meet the needs of their consumers?
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Pizza Ranch decides to only carry Pizza because prices for
chicken has drastically risen. P Q S Pizza
Slide 25
P Q S Starbucks baristas no longer have to hand write drink
specifications onto the paper cups for the drink makers at the
espresso machine. A new order-printing- sticker system has been
devised to make the assembly line of drink making a much faster
process. Starbucks Products
Slide 26
Recently, all Subway stores in the Twin Cities area have
offered a deal of buy 1 sub sandwich and receive a coupon for off
your next sub sandwich. What will happen to the Jimmy John's down
the street? P Q S Subway Jimmy John's P Q S
Slide 27
All food industries (including coffee and beverage stores) have
been subjected to new, very strict FDA policies on how food and
beverages must be delivered, stored, distributed and discarded of.
P Q S
Slide 28
Productivity Their resources are being used in production Look
at productivity to maximize your profits Total Product - All of a
product a company makes in a given time period, with a given amount
of input
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Marginal Product - change in output generated by adding one
more unit of input
Slide 30
Labor & Output M arginal Product of Labor- change in output
from hiring one additional unit of labor 1. Increasing Marginal
Returns- level of production in which the marginal product of labor
increases as the number of worker increases 2. Diminishing Marginal
Returns- marginal product of labor decreases as number of workers
increases
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Elastic Supply Exist when a small change in price causes a
major change in the quantity supplied Products with elastic supply
can be made: 1. Quickly 2. Inexpensively 3. Using a few readily
available resources EX. Sports teams souvenirs: T-shirts, posters,
hats
Slide 32
Inelastic Supply Price change has little impact on quantity
supplied Products are inelastic if production requires a great deal
of: 1. Time 2. Money 2. Not readily available resources Ex. Gold,
fine arts, space shuttles, lake lots (supply is usually fixed)