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Supply- the amount made or offered for sale at given prices
Does not follow the logic of survival, suppliers think more like insatiable creatures, there is no such thing as enough
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Supply schedule of quantities offered for sale at all possible prices in the market
Supply = seller's behavior; no consumers involved!!!
Supply Schedule chart showing
quantities for sale at every price (model of seller's behavior)
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At a given point in time, The lower the
price, the smaller the quantity supplied;
The higher the price the larger the quantity supplied.
This is a DIRECT relationship.
Price Quantity Supplied
$5 50
$10 100
$15 150
$20 200
$25 250
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Plot your graph in your notes!
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Price $
Quantity Bought and Sold (000s)
Supply
$10
100
$20
200
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Change in Quantity Supplied- when the PRICE of a item changes more or less will be supplied
Move ALONG the curve
Price $
Quantity
Supply
$10
100
$20
200
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Many factors effect supply, when they change so does the supply of the product.
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1. Cost of inputs- supplies cost more = can’t afford to make more
2. Productivity- how hard are the workers working
3. Technology- is it easier/ cheaper to make a product
4. Taxes and subsidies- $ paid to gov’t = less money to make a product
5. Expectations – How producers feel about the future of a product
6. Government Regulations – New laws can affect cost of productions
7. Number of Sellers – more sellers = more supply, fewer sellers = less supply
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Size of marketTechnologyOther govenment regulationResource costExpectationSubsidies
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The Supply CurvePrice
Quantity
Supply 1
$10
400
S2
100
S3
900
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Size of Market(Number of Producers)
• If more producers enter a market, the supply will increase.
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Technology
• An improvement in technology increases supply.
• Examples:
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"I will build a motor car for the great multitude."
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• After Ford opened his new Model T plant in 1913, he produced one Model T every 93 minutes, a remarkable reduction from the 728 minutes per car that was previously required.
• By the time the last Model T was built in 1927, the company was producing an automobile every 24 seconds.
• In part because of this efficiency, the Model T's price dropped from its original 1908 cost of nearly $1,000 to under $300 in 1927.
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Other Government Regulations
• Excise Tax• Regulation
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Regulations
• Government intervention in a market through indirect means.– Safety Regulations– Environmental Laws
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Excise Tax
• Two major uses: 1. To discourage the use of a good 2. To help maintain competition in
domestic industries
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Prices of Resources
• An increase in resource prices decreases supply.
• Examples: What would the effect of a frost be on the orange juice market?
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Why do companies outsource?
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Producer Expectations
• Changes in producers' expectations about the future can cause a change in the current supply of products.
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Subsidy
• Government payment to producers to support the market.
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