Download Ch 3 Presentation 2

Chapter 3-Presentation 2
SUPPLY
http://www.youtube.com/watch?v=JWdZEum
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Supply
• A schedule or curve showing the various
amounts of a product that producers are
willing and able to make available for sale
at each of a series of possible prices
during a specific period
Law of Supply
• As prices rise, the quantity
supplied rises… as prices fall, the
quantity supplied falls
• Direct relationship between price
and quantity supplied
Supply Curve
• Upward sloping from left to right showing that
as the price increases, companies are willing
to provide more of good in order to increase
profit
• Remember--- “supply to the sky”
• ***y-axis is price, x-axis is quantity supplied
• Be sure to label supply curve S, S1, S2 etc.
Individual
Supply
Supply Can Increase or Decrease
P
6
Individual
Supply
Qs
60
4
50
3
35
2
20
1
5
Price (per bushel)
P
$5
5
A Movement Between
Any Two Points on a
Supply Curve is Called a
Change in Quantity
Supplied
S3
S1
S2
4
3
2
An Increase in Supply
Means a Movement
of the Line
1
0
2
4
6
8
10
12
14
Quantity Supplied (bushels per week)
Q
Determinants of Supply
• R- Resource Prices- Inputs that go into making a g/s
• O- Other Goods’ Prices - Substitutes (milk/cheese) in
production and joint products (mulch/lumber)
• T- Taxes and Subsidies
• T – Technology Change- increased/decreased
efficiency
• E- Expectations of Suppliers- expect. of future prices
• N- Number of Sellers- more suppliers = higher S
Equilibrium Price
• The price where the intentions of
buyers and sellers meet
• Quantity Demanded = Quantity
Supplied
Equilibrium Quantity
• The quantity demanded = quantity
supplied
• QD and QS at the equilibrium price
Equilibrium Price and Quantity
• Equilibrium exists where the two
graphs meet
Graph: Increase in demand, supply
constant (New E price? Quantity?)
• Equilibrium Price:
• Equilibrium Quantity:
Graph: Decrease in Supply, Demand stays
Constant (New Equilibrium Price/Quantity? )
• Equilibrium Price:
• Equilibrium Quantity:
People Suddenly prefer Fords over
VW
• Price:
• Quantity:
4 New Sub Shops Open In Mayfield
• Equilibrium Price:
• Equilibrium Quantity:
The Price of cheese goes down, show the
effects on the pizza industry
• Equilibrium Price:
• Equilibrium Quantity:
People for Some Reason move
away from Cleveland
• Equilibrium Price:
• Equilibrium Quantity:
Government Raises Business Taxes
• Equilibrium Price:
• Equilibrium Quantity:
Consumers in May Expect a
Drought in August Hurting Oranges
• Equilibrium Price:
• Equilibrium Quantity:
Labor Unions Negotiate Higher
Wages for Auto Workers
• Equilibrium Price:
• Equilibrium Quantity:
Tough Ones
• Supply Increase;
Demand Decrease
• Supply Decrease;
Demand Increase
• Supply Increase;
Demand Increase
• Supply Decrease;
Demand Decrease
Price Quantity
?
?
?
?
Surplus
• The amount that the QS exceeds the
QD at a certain price (above the
equilibrium)
Shortage
• The amount the QD exceeds
the QS at a certain price
(below equilibrium)
Price Floor
• A minimum price fixed by the
government
• A price at or above the floor is legal, but
anything below it is illegal
• Ex- Minimum Wage, Agricultural prices
Price Ceiling
• A maximum price a seller may charge
for a product or service
• Ex- rent controls
Market
Equilibrium
200 Buyers & 200 Sellers
Market
Demand
200 Buyers
Qd
$5
2,000
4
4,000
3
7,000
2
11,000
1
6
6,000 Bushel
Surplus
5
Price (per bushel)
P
Market
Supply
200 Sellers
S
$4 Price Floor
4
3
P
Qs
$5
12,000
4
10,000
3
7,000
2
4,000
1
1,000
2
16,000
1
0
D
2
4
6 7 8
10
12
14
16
18
Bushels of Corn (thousands per week)
Market
Equilibrium
200 Buyers & 200 Sellers
Market
Demand
200 Buyers
Qd
$5
2,000
4
4,000
3
7,000
2
11,000
1
6
S
P
Qs
$5
12,000
4
10,000
3
7,000
$2 Price Ceiling 2
4,000
1
1,000
5
Price (per bushel)
P
Market
Supply
200 Sellers
4
3
2
16,000
7,000 Bushel
Shortage
1
0
2
4
6 7 8
10
D
12
14
16
18
Bushels of Corn (thousands per week)