Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Supply and Demand Supply Definition • The amount of goods and services that producers are willing and able to sell at any one time • Reflects producer behavior, not consumer behavior – Does not take demand into consideration – Motto: “On Planet supply, they will always buy.” MORE PROFIT Supply Curve • Illustrates the amounts that producers are willing to make available at various prices – Reflects the range of possibilities – Curve always slants up and to the right – Price is always on vertical axis, quantity is always on the horizontal axis • Shows the relationship between price and quantity supplied Quantity Supplied • The specific amount of a product that would be available for sale at a specific price – Its shown as a number along the bottom of the graph Law of Supply • Shows the relationship between price and quantity supplied – Cause = Price – Effect = Quantity Supplied Law of Supply continued • As the price of an item increases, the quantity supplied will increase – What affect does this have on profit? – As profits increase, the quantity supplied increases • P → Qs – As the price of an item decreases, the quantity supplied will decrease • ↓P → Qs ↓ • Conclusion: Supply varies directly with changes in price Shifts in Supply • An increase in supply shifts the curve to the right (not up) • A decrease in supply shifts the curve left (not down) Determinants of Supply • Factors that cause changes in supply and shift the curve either left (decrease) or right (increase) – There is a difference in a change in supply and a change in quantity supplied Determinant: Competition • Acts like substitutes for consumers • Competition puts pressure on prices, driving them down – ↑competition→↓profits→↓S – ↓competition→↑profits→↑S Determinant: Resource Costs • Factors of production: land, labor, capital, and management • When resource costs increase, profits decrease, leading to a decrease in willingness to supply ↑Cost of Resources → ↓ Profit → ↓Supply and the curve shifts left • Likewise: ↓Cost of Resources →↑ Profit → ↑Supply and the curve shifts right Determinant: Regulation by Government • Taxes, laws, restrictions, all equal expenses to business – ↑Regulation =↑ Costs – ↓Regulation = ↓ Costs → Profits↓→Supply↓ →Profits ↑→Supply↑ Determinant: Expected Price Change • Prepare for future sales • Must adjust production NOW to be ready for the price change – Expect Price ↑→ S↑ – Expect Price ↓→ S↓ Determinant: Efficiency • Often the result of innovative technology – Production is better, cheaper, faster, more efficient ↑Efficiency → Profit → Supply and the curve shifts right -Reduced efficiency means reduction in supply ↓Efficiency →↓Profits → ↓ Supply and the curve shifts left Profit Motive • Increased profit causes an increase in supply Profit → Supply • Decreased profit causes a decrease in supply ↓ Profit → ↓Supply • Profit isn’t a determinant but if you remember how profit is affected, you will remember in which direction supply shifts.