BELLRINGER

This Saturday I am throwing a princess party for 8 tiny 5-year-old princesses. I need YOUR help—baking, decorating, and helping out during the party. I need help from 7am-9pm (14 hours available).

Think about your plans this weekend. What hours are you willing and able to work at each price point?

$3/hour

$8/hour

$15/hour

Explain the economic reasoning for the hours you wrote down.

Understanding SupplyCHAPTER 5.1

What Supply Means in Economics

Supply is the willingness and ability of sellers to produce and offer to sell different quantities of a good at different prices during a specific time period Example: Jackie is willing to build and sell wooden

chairs, but she doesn’t know how to build wooden chairs. She has the willingness, but not the ability. Thus, Jackie will not supply chairs. Duh!

PajamaJeans! https://www.pajamajeansstore.com/

You Make the Call!!

Suppose you are a supplier, or producer, of PajamaJeans, and the price of a pair rises from $19.95 to $29.95. Would you want to supply more or fewer pairs of

PajamaJeans at the higher price?

If you said “Heck, yes!” congratulations—you instinctively understand the law of supply!

What is the Law of Supply?

The law of supply states that as the price of a good increases, the quantity supplied of the good increases, and as the price of a good decreases, the quantity supplied of the good decreases.

If P then Qs

If P then Qs

Law of Supply vs. Law of Demand

Law of Supply:

If P then Qs

If P then Qs

Law of Demand:

If P then Qd

If P then Qd

Supply vs. Quantity Supplied

Remember: Supply refers to the willingness and ability of sellers to produce and offer to sell different quantities of a good at different prices “supply” refers to the entire line!

Quantity supplied refers to the number of units of a good produced and offered for sale at specific prices “quantity supplied” refers to an amount on the

line!

Illustrating the Law of Supply

A supply schedule is a numerical chart illustrating the law of supply

Illustrating the Law of Supply

A supply curve is a graph that shows the amount of a good sellers are willing and able to sell at various prices

Firm’s Supply Curve vs. Market Supply Curve

Most of the goods supplied in the United States are supplied by business firms Dell, Boeing, Heinz, Nike, etc.

A firm’s supply curve is what it sounds like: it is the supply curve for a particular business

A market supply curve is the sum of all firms’ supply curves

A Vertical Supply Curve

In some instances, goods can no longer be produced. Examples?

Antonio Stradivari’s violins (he died)

Sold out concert

SP

QQ1

P1

P2

Q changes by 0%

P rises by 10%

Bell Ringer

If Kathy sells kazoos for $1 each, she sells 100 units per day. What is her TR per day? If Kathy increases her price to $2 per

kazoo, she sells 40 units per day. What is her new TR?

Are Kathy’s kazoos elastic or inelastic?

If Kathy’s TR were to increase after the price increase, would the good be elastic or inelastic?

The Supply Curve Shifts

CHAPTER 5 SECTION 2

When Supply Changes, the Curve Shifts

Every time the supply of a good changes, the supply curve for that good “shifts”

Change in supply Shift in supply curve

Quick video on supply (Widgets in the house!)

When the Supply Curve Shifts

If supply increases, the curve shifts to the right

If supply decreases, the curve shifts to the left Just like demand, yo!

What Factors Cause Supply Curves to

Shift?(p. 118)

Supply Shifts Groups

You will be assigned one factor that shifts the supply curve to QUICKLY read about and present to the class.

You will make a poster with the following: Name of factor

Explanation of how factor increases or decreases supply

Example of your factor and impact on a real good

Informal graph depicting your example and the way the curve shifts as a result

1. Resource Prices

When resource prices fall, sellers are W & A to produce and offer to sell more of the good The good is cheaper to produce, so they make

more of it. Supply curve shifts to the right!

When resource prices rise, sellers are W & A to produce and offer to sell less of the good

The good is more expensive to produce so they make less of it. The supply curve shifts to the…

left

2. Technology

An advancement in technology is the ability to produce more output with a fixed amount of resources This advancement lowers the per-unit cost, or

average cost, of production

The sellers are willing and able to produce and offer to sell more output. The supply curve shifts to the…

right

3. Taxes

Some taxes increase the per-unit costs Suppose a manufacturer of baby bandanas must

pay a $2 tax for each tiny bandana it produces.

The $2 increases the cost of doing business and causes the manufacturer to supply less output. The supply curve shifts to the…

left

4. Subsidies

Subsidies are financial payments made by the government for certain actions Suppose the government subsidized the

production of corn by paying corn farmers $3 for every bushel of corn they produce

Farmers will want to produce more corn at every price. The supply curve shifts to the…

right

5. Quotas

Quotas are restrictions on the number of units of a foreign-produced good (import) that can enter a country Suppose Japan is sending 100,000 cars to

the US each year and the US government imposes a quota on Japanese cars at 80,000 a year

A quota decreases supply, so the supply curve shifts to the…

left

6. Number of Sellers

If more sellers begin producing a particular good, perhaps because of high profits, supply increases. The supply curve shifts to the…

right

If some sellers stop producing a particular good, perhaps because of losses, the supply decreases. The supply curve shifts to the…

left

7. Future Price

Sellers who expect the price of a good to be higher in the future may hold back the good now and supply the good to the market in the future. The supply curves shifts to the…

left Sellers who expect the price of a good to be

lower in the future may want to supply the good now instead of later. The supply shifts to the…

right

8. Weather Bad weather may reduce the supply of many agricultural

goods Bad weather, such as a hurricane, may also damage fishing

boats, oil refineries, etc

The supply curve shifts to the…

left

Unusually good weather can increase the supply The supply curve shifts to the…

right

What Factor Causes a Change in Quantity Supplied?

Only one thing can cause a change in the quantity supplied

PRICE

Elasticity of Supply

Elasticity of supply is the relationship between the percentage change in quantity supplied and the percentage change in price

Elastic supply exists when the quantity supplied changes by a greater percentage than price

Inelastic supply exists when the quantity supplied changes by a smaller percentage than price

Supply Curve Practice:

Now you get to show yourUnderstanding of the supplycurve, as well as the 8 amazing factors that can cause it to shift!