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					       With demand,
  you were the consumer!

          With supply,
you are the producer…
the entrepreneur…
the business owner…

  You are trying to make a PROFIT!!!
  How much should a producer
supply on the shelves of a store?
In the last chapter, we
learned that demand sets
 For example, if a popular pair of shoes
  has just gone on the market…
 and demand is high…

 Producers will set the price HIGH! Why?
 Because the producer wants to make a
  lot of $$$ off your demand!
Supply is . . .
  Various quantities of   $20
   a good/service
   producers are willing
   to sell at various
  Look at p.582           $40
                               With supply, suppliers/producers

#2                               offer different quantities
                              of a product depending on the
 Supply is the opposite of
                              price that buyers
                              are willing to pay.
 When we learned about
buyers/consumers demanded     (Think about that carefully! Read
   different quantities          these 2 answers again slowly.)
of a good depending on the
that sellers ask.

 Remember with demand:

    as prices rise, demand falls.
    as prices fall, demand also rises.
#5    With supply, as price rises for a good, the
       quantity supplied also rises. (In other words, if
       people are willing to pay a high price, put a lot
       of goods on the shelf. It means more $$$ for
       the producer!)

    Look at supply schedule & supply curve on
        p. 582.

    As price falls for a good, the quantity supplied
     also falls. (This is b/c no one is buying the few
     that are on the shelf, so the producer puts
     them on sale.)
#6 The Law of Supply
       This principle states that
    suppliers will offer more for sale
            at a higher price
         less at a lower price.
#6 cont’d
      The higher the price of the good,
          the greater the incentive
               for a producer
       to make more (of the product).

           Add this to your answer:
                In other words,
    the producer will expect a higher profit
            b/c of the higher price.
Therefore, the incentive that
motivates producers is

#7a, 7b, 7c
Individual Supply for one video game
company called Software House

 If Software House has 100 video games
  on the shelf to be sold, they will sell them
  for $50.
 If Software House has 70 video games
  on the shelf to be sold, they will sell them
  for $30.
 If Software House has 1 video game on
  the shelf to be sold, they will sell it for $5.
 #7e        Price x Quantity = Total Revenue
  Price                    Quantity                 Revenue
  $50                      100                      $5,000
  $40                      90                       $3,600
  $30                      70                       $2,100
  $20                      30                       $600
  $10                      10                       $100
  $5                       1                        $5

From the chart, how much $ would you like to earn?
   To make the most profit, your company would have 100 games on the shelf &
                   sale them for $50! $5000 in total revenue!
In the supply curve,
  Quantity represents
    the amount of a good/service a business/producer is
     willing to supply/produce.

 Don’t confuse this w/ the demand. With demand,
  quantity represented how much YOU were
  willing to buy. This is supply! Here, quantity is
  how much you will sell.
The supply curve slopes
  UP!

  Remember, the demand curves slopes

  This reflects that suppliers are willing to
   offer more products at a higher price and
   fewer products at a lower price (because
   they have gone on sale & there aren’t
   many left).

  They won’t be able to pay their bills!

  They won’t be able to make a profit in
   order to make $$$$$!
Profit is defined as . . .
   The amount of money a business
    receives above its (fixed & variable)
Producers can use their
profit in 3 ways:

 a. increase the wages of its workers!
    (investing in human capital)

 b. purchase other things the company
     needs (office equipment, scanners)

 c. keep the profit for themselves & spend it.
Market Supply is defined
as . . .
  Combining all the supply schedules of all
   businesses that provide the same type of
   good or service

  examples: all sporting goods stores
             all car washes
             all video game stores
             all music stores
Market Supply for all video game companies
(Sony, Nintendo, XBox)
   Price          Quantity   Revenue
   $50            275        $13,750
   $40            225        $9,000
   $30            180        $5,400
   $20            105        $2,100
   $10            55         $550
   $5             30         $150
The supply curve slopes up
  Producers are willing to
    sell more games at higher prices
  Why? To make a profit!
The most significant
influence of on quantity
supplied is

Changes in Supply
  #18
 For a change in supply to take place,
 producers must decide to offer a different
   quantity of output at each possible price in the

  #19
 When the supply goes down, the supply curve
   shifts left. When supply goes up, it shifts to the
We will now skip to #24 to
   fill in the big chart!
 Follow the instructions!
The factors that affect supply &
determine how many goods are sold
 (All of these need to be listed in the far left hand box for your chart in # 24.)

     Changes in the cost of resources
     Productivity
     Technology
     Changes in Govt. Policies
     Changes in Taxes
     Changes in Subsidies
     Changes in Expectations
     Changes in the # of Suppliers
Fill in the answers for #24.
               Factor                  Example of             Example of
                                   Increase in Supply      Decrease in Supply
Changes in the cost of resources


Technology                                 In order to fill these boxes in,
                                           the next 8 slides will give you
Changes in Govt. Policies                  the information that needs to
                                           be copied. If you think your
                                           handwriting won’t fit, you may
Changes in Taxes
                                           use a separate sheet of
                                           paper. Go ahead & click to
Changes in Subsidies                       the next slide.

Changes in Expectations

Changes in the # of Suppliers
Changes in the cost of resources
        ( the supplies you need to make your product)

 Increase in Supply                  Decrease in Supply
  You own a cake company.            The price of eggs, milk, and
  On a regular week, you make          flour all go up.
    100 cakes.                        You can only produce 85
  The price of eggs, milk, and         cakes instead of 100.
    flour all go on sale & are 50%   ***********************************
                                      The cost of your resources
  You can now produce 120              went up, so your supply of
    cakes.                              cakes went down = decrease
 *******************************        in supply!
  The cost of your resources
    went DOWN, so your supply
    of cakes went UP = increase
    in supply!
(making goods faster, more efficient)
  Increase in Supply            Decrease in Supply
   The Barbie doll company      The Barbie Doll
     figures out they can get     company has each
     dolls made faster if its     worker making an entire
     workers work in an           doll all by himself.
     assembly line!              Some dolls are missing
   Station 1: puts on arms       an eyeball. Some have
   Station 2: puts on legs       no left arm. Those dolls
   Etc, Etc.                     have to be thrown out.
   They can get 2x as           Decrease in Barbies!
     many dolls completed.
   Supply of Barbies
Using Technology
Increase in Supply                Decrease in Supply
 A grocery store has its          A grocery store has its
   cashiers use cash registers      cashiers checking out
   to check-out customers.          customers using a calculator
 Grocery stores also use           (or worse, doing the math on
   scanners.                        w/ pencil & paper)
 Faster technology = can get      This is taking too long!
   customers through the line      The check-out lines have 20
   more quickly!                    customers waiting & many are
 Therefore, more goods sold!       getting frustrated.
 Supply of goods going out the    Several customers leave!!
   door (sold) goes increases!     Goods aren’t being sold.
                                   Supply of goods going out the
                                    door (not sold) decreases!
Changes in Govt. Policies
Increase in Supply            Decrease in Supply
 Changes in govt. policies  20 people work at McD.
   very, very rarely leads to  The govt. raises minimum
   an increase in supply.       wage to $10/hr.
                               This adds to McD’s variable
                               McD has to fire 10 workers
                                b/c they can’t pay
                               Those 10 people who are
                                left working can’t produce
                                as many hamburgers.
                               Decrease in supply of
Changes in Taxes
 Increase in Supply        Decrease in Supply
  The govt. lowers the     The govt. raises the
   taxes on a business’      taxes on a business’
   equipment.                equipment.
  Its variable costs go    Its variable costs go
   down.                     up.
  The business can         The business
   produce more goods        produces fewer
   b/c of low taxes.         goods b/c of high
  Increase in supply!       taxes.
                            Decrease in supply!
Changes in Subsidies
     (when the govt. pays a portion of the costs for a
 Increase in Supply                  Decrease in Supply
  It costs a farmer $500 to ship     Govt. subsidies do not cause
    its milk out of state.             a decrease in supply unless
                                       the govt. has to take the
  The govt. subsidizes the cost       subsidy away.
   & agrees to pay $300 of it.

  The farmer can ship even
   more milk b/c the govt. is
   going to help pay for it.

  It’s like free money as long as
   the business it doing right.

  Increase in the supply of your
   product to be sold! More $$ in
   the entrepreneur’s pocket.
Changes in Expectations
Increase in Supply         Decrease in Supply
 Businesses expect         Businesses expect
  that consumer              that consumer
  demand will be high        demand will be low in
  in the future.             the future.
 Therefore, business       So, they will make
  will prepare to make       less of their product.
  lots of their product.    Example:
 Example:                    Not making as many
    Preparing to sell         desktop computers
     iPads                  Decrease in supply
 Increase in supply of      of desktops
Changes in the # of Suppliers
 Increase in Supply                Decrease in Supply
  More suppliers selling           When suppliers go out of
    goods in the market:             business or leave the
          Nike                      market.
          Reebok
          Adidas
                                    Supply of shoes
          Nu Balance                decrease!
          Whoa! That’s a lot of
  Supply of shoes
Now, back to #20 -23.

 Elastic Supply & Inelastic Supply

 20. Define supply elasticity.
     the measure of how the quantity supplied of a
   g/s changes in response to the price

 21. A product is said to be supply elastic if quantity
   changes a lot when prices go up or down.
   Example: selling kites, bikes, cars
22. How is oil an example of supply inelastic?
    b/c when oil prices go up, oil companies can’t
  just quickly dig a new well, build a pipeline, build
  an oil refinery, and make the gas. Inelastic supply
  of goods is not that easy, not flexible. It takes a
  while to get those goods made.

23. A product is said to be supply inelastic if quantity
  changes very little.
 Example: oil

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