Download Determinants of Supply

Changes in Supply 4.2
Determinants of Supply: Factors other
than price that can change or shift the
supply curve.
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Prices of Resources—
Government Tools
Technology
Competition
Prices of related goods
Producer Expectations
Determinants of Supply
Prices of Resources--=Raw materials,
electricity, workers wages, etc.
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Any of these can increase or decrease a
business’s production costs.
Lower costs=higher profits
Producers can supply more product
Supply curve shifts to the right
Government Tools 4.2
Taxes, Subsidies, and Regulation
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Tax-Required money paid to the government to
help fund services.
Taxes add to a business’s production costs
Higher taxes=higher production costs
Higher production costs=lower profits
Subsidies—Payments to private businesses.
Ex. Wheat farmers—Encourages more
Government Tools 4.2
Regulation—Rules that the
government passes about how
companies conduct business.
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Ex. Pollution, Safety,
Strict rules—cost $ and reduce supply
Loose rules—cost less $ increase supply
Technology 4.2
Powerful tool that makes production
more efficient and less expensive.
Ex. Automobiles—
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1900 made 1 at a time
Assembly line invented
Costs went down—more profitable—more
supply
Competition 4.2
Competition increases supply
Lack of competition decreases supply
Why?
Demand for product grows
Encourages competitors to enter market
Supply curve shifts to the right
Prices of Related Goods 4.2
The supply for one good is connected
to the supply for its related goods.
Ex. Wheat Farming
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Price of wheat falls
Price of corn is up
Choose to grow corn instead
Supply of wheat down/Corn supply up
Producer Expectations 4.2
The expectations suppliers have of future
changes in the price of their products can affect
how much to supply now of a product.
Ex. Basketballs—Start of school year
 Demand low now—but will increase in
November
 So, company increases supply now to meet
expected November demand
 Supply curve shifts to the right
The Chicken Farm Exercise
I. Supply: 10 chickens x 5 Eggs/wk.
=50/12=4.2Dz
Demand: 10 Dz./Wk.
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Demand>Supply; Scarcity/Surplus? Price?
Supply?
II. Supply: 30x5=150/12=12.5 Dz.
Demand: 10 Dz./Wk.
Supply>Demand; Scarcity/Surplus?
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Price? Supply?