factors that affect supply. changes in quantity supplied an increase or decrease in the amount of a...
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FACTORS THAT AFFECT SUPPLY
CHANGES IN QUANTITY SUPPLIED
• An increase or decrease in the amount of a good or
service that producers are willing to sell because of a
change in price.
• Changes in quantity supplied occur due to a change in
price, assuming “all other things being equal.” (Just
like in quantity demanded)
• Example: If you are a farmer selling tomatoes and the price of
tomatoes has increased from $1 per to $3 per pound then the
quantity demanded would increase. (You can make more
money if you sell more tomatoes)
CHANGES IN QUANTITY SUPPLIED
• What does this look like?• Change in quantity supplied moves along the supply curve.
As you move up the supply curve the quantity supplied increasesAs you move down the supply curve the quantity supplied decreases
SHIFTS IN SUPPLY
• Occurs when a change in the marketplace
prompts producers to sell different amounts at
every price.
• When production costs increase supply
decreases
• When production costs decrease supply
increases
• Just like in demand, change in supply actually
shifts the supply curve.
FACTORS THAT SHIFT SUPPLY
• Input costs
• The price of the resources needed to
produce a good or service.
• You make nutrition bars that contain
peanuts. If the price of peanuts increase.
You can no longer afford to produce as many
bars.
• Shifts supply curve to the LEFT.
FACTORS THAT SHIFT SUPPLY
• Labor Productivity
• The amount of goods or services that a
person can produce in a given time
• Increasing productivity decreases the
costs or production which will increase
supply.
• A better trained and more skilled workers can
produce more goods in less time.
• Shifts curve to the RIGHT
FACTORS THAT SHIFT SUPPLY
•Government Action• Government Action can affect costs of production both
positively and negatively.
• Negative – Excise tax: A tax on production or sale of a specific
good or service.
• Tax on tobacco. The tax increases producers’ cost and then will
decrease the supply of these items.
• Positive – Subsidies: purpose is to encourage the sale of an
item by artificially reducing the cost.
• Corn Subsidies. Government pays corn producers to reduce costs
and thus increasing demand.
FACTORS THAT SHIFT SUPPLY
• Technology• Can result in new production methods which can allow you to
make goods more efficiently
• Shifts to the RIGHT
• Producer Expectations• If producers expect the price of their product to rise or fall in the
future it will affect how much they are willing to produce.
• Example: If a manufacturer believes that the price of their
product will rise, they may run the factory for an extra shift or
invest in more equipment to increase supply.
FACTORS THAT SHIFT SUPPLY
•Number of Producers• When a company develops a successful new idea other
producers will enter the market and increase the supply
of the good or service.
• Example: You are the only person at Partridge Creek
selling ice cream cones. Then 3 months later, 4 other
vendors start selling at the mall.
• Because there are more ice cream cones in the market,
the supply has increased.