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Economics 4/11/11 http://mrmilewski.com • OBJECTIVE: Demonstration of Chapter#4 and begin examination of supply. • I. Administrative Stuff -attendance & distribution of test • II. Chapter#4 Test • III. Journal #15 pt.A -Examine Figure 5.1 & Figure 5.2 p.114&115 1.) How does the Law of Supply differ from the Law of Demand? 2.) Why are the supply curves upward sloping? • IV. Journal #15 pt.B -notes on supply Law of Supply • • The principle that suppliers will normally offer more for sale at higher prices and less at lower prices. As price goes up, quantity produced also goes up Supply Curve: • At high prices more will be supplied. At lower prices, less will be supplied. • Price and quantity supplied are directly related. • The drawing to the right is a typical supply curve. Supply Schedule • Supply schedule is just like the demand schedule, but the supply schedule shows both quantity supplied and price rise together. Quantity Supplied Construct a Supply curve using the following data Quantity Supplied On your supply curve • Label the point where price is $15 and quantity supplied 4 units as point a. • Next label the point where price is $20 and quantity supplied is 6 units as point b. • Movement from point a to point b, or to any other point along the supply curve is movement in quantity supplied. Movement along the Supply Curve/ Change in quantity supplied. Change in supply • A change in supply occurs when something happens to cause suppliers to offer different amounts of products for each price in the market. Change in supply • A change in supply occurs when something happens to cause suppliers to offer different amounts of products for each price in the market. What can cause a change in supply to the right? • Lower cost of inputs such as cheaper labor or cheaper packaging • More productive/better trained labor. • New technology like more fuel efficient delivery vehicles, better/faster machines • Lower taxes/government subsidies (subsidy is a government payment to an individual or business to encourage or protect a certain economic activity.) What can cause a change in supply to the left? • • • • • More expensive labor Higher taxes Less efficient workers Broken technology Withdrawal of subsidies Economics 4/12/11 http://mrmilewski.com • OBJECTIVE: Examine supply elasticity. • I. Journal #16 pt.A -Read “Profiles in Economics” p.121 -Answer question #1 p.121 • II. Return of Chapter#4 Test • III. Quiz #9 • IV. Journal #16 pt.B -notes on the elasticity of supply • V. Econ U.S.A. episode#16 -questions on film Supply Elasticity Type of Elasticity Change in Quantity Supplied Due to a Change in Price Elastic More than proportional Unit Elastic Proportional Inelastic Less than proportional Supply Elasticity • Supply elasticity is caused by the ability of a producer to change output. • If producers can increase output quickly, supply is elastic. • If producers can not increase output quickly, supply is inelastic. Theory of Production • The relationship between the factors of production (land, labor, capital, entrepreneurs) and output of goods and services. • Short run – change in the variable of labor • Long run – change in land & capital Economics 4/13/11 http://mrmilewski.com • OBJECTIVE: Examine supply elasticity. • I. Journal #17 pt.A -Read “The Global Economy” p.130 -Answer questions (1-2) p.130 • II. Journal#17 pt.B -notes on the theory of production • III. Journal#17 pt.C -questions on film about innovation • IV. Math Practice with Economics Theory of Production • The relationship between the factors of production (land, labor, capital, entrepreneurs) and output of goods and services. • Short run – change in the variable of labor • Long run – change in land & capital Law of Variable Proportions • Stage I – Increasing returns *output rises at an increasingly faster rate (each new worker makes more than the previous worker did) • Stage II – Diminishing returns *output rises at a diminishing rate (each new worker increases output, but not as much as the previous worker did) • Stage III – Negative returns *output decreases as each new worker is added Measure of Costs • Fixed cost – the cost that a business incurs even if the plant is idle and production is zero -salaries to executives -interest on bonds -rent payments -taxes -depreciation • Overhead – total fixed cost • Variable costs – costs that change when output changes -hourly workers -power -freight charges -raw materials • Total costs – the sum of fixed and variable costs • Turn to page 133 From Poop to Profits • 1.) What is innovation? What does it have to do with entrepreneurship? • 2.) Why did Brad Morgan keep refining his products and processes? • 3.) Why do entrepreneurs need freedom? • 4.) What do the farmer and the bookstore owner have in common? Economics 4/14/11 http://mrmilewski.com • OBJECTIVE: Working with supply. • I. Administrative Stuff -attendance & follow ups • II. Quiz#10 • III. Economics Lab -Supply & Demand • IV. Mindjogger -video quiz on Chapter#5 Supply • NOTICE: Chapter#5 Test Tomorrow! Bell Schedule • • • • • • • 1st Hour 7:41 – 8:45 2nd Hour 8:50 – 9:55 3rd Hour 10:00 – 11:25 1st Lunch 10:00 – 10:25 2nd Lunch 10:30 – 10:55 3rd Lunch 11:00 – 11:25 Drill @ 11:30 Where will profits be maximized? Directions • 1.) Identify the factors of production in the film. • 2.) Identify the public goods in the film. Economics 4/15/11 mrmilewski.com • OBJECTIVE: Demonstration of Chapter#5 and begin examination of price. • I. Administrative Stuff -attendance & distribution of test • II. Chapter#5 Test • III. Journal #18 pt.A -Read “Business Week Newsclip” p.126 -Answer questions (1-2) p.126 • IV. Journal #18 pt.B -notes on prices • V. Journal#18 pt.C Film: I Pencil The Week After Spring Break • • • • • • Monday 4/25/11 – No School Tuesday 4/26/11 – Journal#19 Wednesday 4/27/11 – Journals#11-20 Due Thursday 4/28/11 – ½ Day Conferences Friday 4/29/11 – Prom Day Saturday 4/30/11 – Hebda Cup Schedule • • • • 1st Hour: 2nd. Hour: 4th. Hour: 3rd. Hour: 1st. Lunch: 2nd. Lunch: 3rd. Lunch: • 5th Hour: • Assembly: 7:41 - 8:35 am 8:40 - 9:30 am 9:35 - 10:25 am 10:30 - 11:55 am 10:30 - 10:55 am 11:00 - 11:25 am 11:30 - 11:55 am 12:00 - 12:50 pm 1:00 - 2:15pm How is price determined? • Price is determined by the intersection of supply & demand. Prices as Signals • Price – the monetary value of a product as established by supply & demand. • Price is a signal that helps us make economic decisions. • High prices are a signal for producers to produce more and consumers to buy less. • Low prices are a signal for producers to produce less and consumers to buy more. Advantages of Prices • 1.) Prices in a competitive market favor neither the producer nor the consumer. • 2.) Prices in a market economy are flexible. • 3.) Prices have no administrative costs and answer the questions WHAT, HOW, and for WHOM to produce. • 4.) You have known it your entire life. Life without prices? • Prices help allocate scarce resources, but what if there was no such thing as price? • Rationing – the government determines everyone’s “fair” share. • Problem with determining what is fair. • High administrative stuff (cost, enforcement, etc) • No incentive to work hard. I Pencil Questions on “I Pencil” • 1.) What does Milton Friedman mean by saying there is nobody in the world who knows how to make a pencil? • 2.) What kind of transaction makes a free market possible? • 3.) What must be true for all parties in a voluntary transaction? • 4.) What is the price system? • 5.) What is the zero-sum game philosophy? • 6.) What is meant by the invisible hand?