With demand,
you were the consumer!
With supply,
you are the producer…
the entrepreneur…
the business owner…
You are trying to make a PROFIT!!!
Supply!
How much should a producer
supply on the shelves of a store?
21-3
In the last chapter, we
learned that demand sets
prices!
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 $$$ off your demand!
#1
Supply is . . .
Various quantities of $20
a good/service
producers are willing
to sell at various
prices
Look at p.582 $40
#3
With supply, suppliers/producers
#2 offer different quantities
of a product depending on the
Supply is the opposite of
price that buyers
demand.
are willing to pay.
When we learned about
demand…
buyers/consumers demanded (Think about that carefully! Read
different quantities these 2 answers again slowly.)
of a good depending on the
price
that sellers ask.
#4
Remember with demand:
as prices rise, demand falls.
as prices fall, demand also rises.
#5 With supply, as price rises for a good, the
quantity supplied also rises. (In other words, if
people are willing to pay a high price, put a lot
of goods on the shelf. It means more $$$ 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
and
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
Profit!
#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!
#8
In the supply curve,
Quantity represents
the amount of a good/service a business/producer is
willing to supply/produce.
Note:
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.
#9
The supply curve slopes
UP!
Remember, the demand curves slopes
down.
#10
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).
#11
They won’t be able to pay their bills!
They won’t be able to make a profit in
order to make $$$$$!
#12
Profit is defined as . . .
The amount of money a business
receives above its (fixed & variable)
costs!
#13
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.
#14
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
#15
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
#16
The supply curve slopes up
b/c
Producers are willing to
sell more games at higher prices
Why? To make a profit!
#17
The most significant
influence of on quantity
supplied is
Price!
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
market.
#19
When the supply goes down, the supply curve
shifts left. When supply goes up, it shifts to the
right.
We will now skip to #24 to
fill in the big chart!
Follow the instructions!
#24
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
Productivity
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% ***********************************
off.
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!
Productivity
(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
increase!
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
costs.
McD has to fire 10 workers
b/c they can’t pay
everyone.
Those 10 people who are
left working can’t produce
as many hamburgers.
Decrease in supply of
hamburgers!
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
business)
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
iPads
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
shoes!
Supply of shoes
increase!
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