supply dr. t. d. mitchell bonneville high school idaho falls, idaho economics: concepts and choices,...
TRANSCRIPT
SUPPLY
Dr. T. D. Mitchell
Bonneville High School
Idaho Falls, Idaho
Economics: concepts and choices, 2011. Holt McDougal
Economics: concepts and choices, 2011. Holt McDougal
SUPPLY
• Concept Review• Demand is the willingness to buy a good or service and the
ability to pay for it.
• Chapter 5 Key Concept• Supply is the willingness and ability of producers to offer goods
and services for sale.
WHAT IS SUPPLY?
Objectives for this section:• Define supply and outline what the law of supply says.• Explain how to create and interpret supply schedules.• Explain how to create and interpret supply curves.
Economics: concepts and choices, 2011. Holt McDougal
Economics: concepts and choices, 2011. Holt McDougal
THE LAW OF SUPPLY
• Supply• Law of Supply• Price and Supply
Economics: concepts and choices, 2011. Holt McDougal
SUPPLY SCHEDULES
• Individual supply schedules• Market supply schedules• Supply curve
WHAT ARE THE COSTS OF PRODUCTION?
Objectives for this section:• Analyze how businesses calculate the right number of
workers to hire.• Determine how businesses calculate production costs.• Explain how businesses use those calculations to determine
the most profitable output.
Economics: concepts and choices, 2011. Holt McDougal
Economics: concepts and choices, 2011. Holt McDougal
LABOR AFFECTS PRODUCTION
• Marginal Product – the change in total output brought about by adding one more worker.
• Specialization – having a worker focus on a particular aspect of production.
• Marginal Product Schedule – shows the relationship between labor and marginal product. One or two workers produce very little.
• Increasing Returns – occur when hiring new workers causes marginal product to increase.
Economics: concepts and choices, 2011. Holt McDougal
MARGINAL PRODUCT SCHEDULE
Number of workers
Total Product Marginal Product
0 0 0
1 3 3
2 7 4
3 12 5
4 19 7
5 29 10
6 42 13
7 53 11
8 61 8
9 66 5
10 67 1
11 65 -2
Economics: concepts and choices, 2011. Holt McDougal
LABOR AFFECTS PRODUCTION
• Increasing Returns – occur when hiring new workers causes marginal product to increase.
• Diminishing Returns – occur when hiring new workers causes marginal product to decrease.
Economics: concepts and choices, 2011. Holt McDougal
PRODUCTION COSTS
Management Machinery Mortgage on Factory
Examples of Fixed Costs
Economics: concepts and choices, 2011. Holt McDougal
PRODUCTION COSTS
Workers Computer Cases Circuits
Examples of Variable Costs
Economics: concepts and choices, 2011. Holt McDougal
PRODUCTION COSTS SCHEDULE
# of Workers
Total Product Fixed Costs Variable
Costs Total Cost Marginal Cost
1 0 40 0 40 --
2 3 40 30 70 10
3 7 40 62 102 8
4 12 40 97 137 7
5 19 40 132 172 5
6 29 40 172 212 4
7 42 40 211 251 3
8 53 40 277 317 6
9 61 40 373 413 12
10 66 40 473 513 20
11 67 40 503 543 30
Economics: concepts and choices, 2011. Holt McDougal
EARNING THE HIGHEST PROFIT
• Marginal Revenue – is the money made from the sale of each additional unit of output.
• Total Revenue – is a company’s income from selling it’s products.
• Profit-Maximizing Output – is the level of production at which a business realizes the greatest amount of profit.
WHAT FACTORS AFFECT SUPPLY?
Objectives for this section:• Explain the difference between change in quantity supplied
and change in supply.• Understand how to determine a change in supply.• Identify the factors that can cause a change in supply.
Economics: concepts and choices, 2011. Holt McDougal
Economics: concepts and choices, 2011. Holt McDougal
CHANGES IN QUANTITY SUPPLIED
A change in the price of bicycles…
…causes a change in the quantity supplied
Economics: concepts and choices, 2011. Holt McDougal
CHANGES IN SUPPLY
Input Costs
Labor Productivity
Technology
Government Action
Producer Expectations
Number of Producers
Economics: concepts and choices, 2011. Holt McDougal
THE SUPPLY CURVEP
Q
S
A change in quantity supplied
S1
S2
A positive change in positive quantity
supplied
A negative change in price and quantity
supplied
P
Q2 Q Q1
Economics: concepts and choices, 2011. Holt McDougal
WHAT IS ELASTICITY SUPPLY?
Economics: concepts and choices, 2011. Holt McDougal
WHAT AFFECTS ELASTICITY SUPPLY?
• There are far fewer factors that affect elasticity of supply than elasticity of demand.• Changing production to respond to a change in price.
• Given enough time, the elasticity of supply increases for most goods and services.
• Supply will be more elastic over a year or several years than it will be if the time to respond is a day, week, or a month.
• Some industries, take a great deal of time to shift the resources of production to respond to the price changes.
Economics: concepts and choices, 2011. Holt McDougal
END OF NOTES!