Warm - Up

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Warm - Up

• How do the owners of fast food restaurants know
  how much food to produce each day?

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Ch 5.1

• Understanding Supply

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Supply

• Supply is the amount of goods available
• The ___________ is the higher the price, the
  larger the quantity produced. Thus the lower the
  price, the quantity supplied falls.
• The search for _____ drives the suppliers
  decision.

Law of Supply
profit
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Supply Schedule

• Shows the relationship between ______________
  supplied for a specific good.
• Like a demand schedule, a supply schedule lists
  supply for a very specific set of conditions.
  Again, only looking at ______________. Other
  factors such as the cost of tomato sauce, labor
  and rent are assumed to remain _______.

price and quantity
price and output
constant
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• Market Supply Schedule shows the total supply in
  a market.
• A Supply curve is the same as demand ________ the
  horizontal axis now measures the quantity of the
  good _______ not the quantity demanded.

EXCEPT
supplied
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Elasticity Supply

• Elasticity of supply measures the way suppliers
  respond to a change in price
• It is the ______________
• What determines whether the supply of a good will
  be elastic or inelastic? The key factor is time.
  

SAME AS DEMAND
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TIME

• Time is the key factor in determining whether the
  supply of a good will be elastic or inelastic
• In the _______, firms are more _______, so supply
  is more elastic
• In the ________, companies are ___________
• Ex. Orange grove takes years to grow(inelastic)
• Haircut need more, hire workers, if less
  workers go elsewhere(elastic)

long run
flexible
short run
less elastic
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Elastic or Inelastic?

• Price of apples increase
• Price of an oil change
• Price of dry cleaning services
• Price of football tickets
• Hotel rooms
• Taxi rides
• Photographs
• Taxi rides

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Ch 5.2

• Cost of Production

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Labor and Output

• Marginal Product of Labor
• Change in output from hiring one more worker
  (look at Figure 5.6 p. 109)
• Specialization increases output per worker, so
  the second and third worker add more to output
  than the first
• INCREASING MARGINAL RETURNS BUT get
• DIMINISHING MARGINAL RETURN with the 4th-7th
  worker hired and
• NEGATIVE MARGINAL RETURN with the 8th worker

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• _________ marginal returns specialization
  _____________ per worker
• ___________ marginal returns adding more
  workers increases total output, but at a
  _________ rate.
• _________ Marginal Returns is an actual
  decrease in output.

Increasing
increases output
Diminishing
decreasing
Negative
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Production Costs (p. 111)

• Fixed Cost
• Does __________ no matter how much produced.
  (ex. Rent, taxes on a factory)
• Variable Cost
• Rise or fall depending on ________________.
  ( ex. Electricity, labor)
• Total Cost
• Fixed plus variable total
• Marginal Cost
• The additional cost of producing ____________.

not change
quantity produced
one more unit
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Setting Output

• The best level of output is to find the output
  level where marginal revenue is equal to marginal
  cost.
• IPHONE

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To Shutdown or to not shutdown

• If shuts down still have to pay ________
• Sometimes keeping a money-losing factory open is
  the better choice
• Amazon.com (next class) v. Circuit City

fixed costs
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BUSINESS

• Create a business
• Give it a name
• Tell me what you produce whether it is an
  inferior good, a complement, a necessity or a
  luxury good
• Do you EXPORT Where?
• create a supply schedule for that product
• make a supply curve (p. 105)
• Then take that business decide how many
  employees to hire...
• what are your fixed and variable costs?
• CREATE AN ADVERTISEMENT OR CARD FOR YOUR
  BUSINESS
• And for homework?

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Your Supply Market

• We are going to hold a Market auction in class.
  Next class
• Bring in an item to contribute
• this will be a 100 quiz grade will allow you
  to participate in the game.
• I am not telling you how much to spend or to not
  spend be creative maybe your job or parent
  can donate something from work
• You will get as many dollars as your percentage
  in class to use for exchange.
• If you win the bidding war you win the item
• If the class does not bring anything then we
  will have a quiz instead?

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WARM-UP

• List 3 goods one that is usually available and
  on sale, another that is popular but difficult
  to find, and a third that falls in-between
  ...what prices do stores charge for these
  products?

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Ch 5.3

• Changes in Supply

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INPUT

• Any change in the _____ of an input used to
  produce a good such as raw materials,
  machinery, or labor will affect supply.
• A rise of ______ causes a fall in _______ at all
  price levels.
• A fall in input will cause an ________ in supply
  at all price levels.

cost
input
supply
increase
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Technology

• _______ costs and increases supply at all price
  levels
• This shifts the supply curve to the ____

Lowers
right
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Government Supply

• Subsidies
• Government payment that supports a
  _________________. Ex. Farms
• Taxes
• Excise tax is a tax on the _________________ of a
  good Who does this hurt? lower income
• Ex Alcohol, cigarettes
• Regulation
• Government intervention in a market that affects
  the price, quantity, or quality of a good.
• This can _____________ supply indirectly and
  often increases price.

business or market
production or sale
raise or lower
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Other influences

• Future price expectations of prices.
• If the seller expects the price of a good to rise
  in the ______, the seller will ____ the goods now
  in order to ________ in the future. On the other
  hand, if the price of the good is expected to
  ____ in the near future, sellers will earn more
  money by placing goods on the market ___________
  before the price falls. Expectations of higher
  prices will ____________ now and increase supply
  later, and expectations of lower prices will have
  the opposite effect.

future
store
sell more
drop
immediately
reduce supply
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• Number of suppliers producing a good
• If more suppliers enter a market to produce a
  certain good, the market supply of the good will
  ____, and the supply curve will shift to the
  _____. On the other hand, if suppliers stop
  producing the good and leave the market the swill
  decline.

rise
right
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Toe mae toeTa ma toe, Poe tae toePoe ta toe

• Present a scenario in which the supply of
  tomatoes or potatoes is affected by each Role's
  input costs (ex. Higher wage, lower fertilizer
  costs)
• Create and present the scenario how it changes
  the supply of tomatoes
• ROLES farm worker, grocery clerk, fertilizer
  salesperson, production technology sales rep,
  tomato/potato grower
• Put on butcher paper create a Supply Curve