SupplyThe amount of a product that would be produced, grown, or acquired, and offered for sale at all possible prices.

Law of SupplyThe price of an item determines the quantity supplied.

The higher the price, the more of that product will be put for sale.The lower the price, the less of that product will be put for sale.

Stop and discuss this with your neighbor.

What is the general price of swimsuits bought in December?

Is this different from May or June?

Why might this occur?

Price Qty.5.00 254.00 173.00 112.01 7

Supply schedule for toilet paper, meant to be thrown at Mrs. Price’s house on Halloween.

Why would H.E.B. sell more toilet paper at a higher price?

Do you think they should offer a discount because it is going into her trees?

Why does the supply curve go up and to the right?

If there is an increase in demand, how does that affect suppliers?

So, what is Quantity Supplied then?

What will cause changes to Supply• Natural/Manmade Phenomenon• Input Costs• Competition• Expectations• Profitability of alternative goods in supply• Profitability of goods in joint-supply

Natural/Manmade Phenomenon – Think Hurricane Katrina, Strikes, Wars, the Monday following the Super Bowl.

Input Costs – changes in the costs of production. This would include resources, materials, labor costs, upgrades to factories, etc.

Competition – The number of sellers affects how much of a product or service is available. The more sellers, the products, and the lower the price. This is good for consumers as it also forces companies to develop new and better products.

Competition – The number of sellers affects how much of a product or service is available. The more sellers, the products, and the lower the price. This is good for consumers as it also forces companies to develop new and better products.

Expectations – Expectations of future prices determine whether a firm produces a product or stops. If a firm can make more money producing something else, this is profitability of goods in joint supply.

Technology – makes the production process cheaper and therefor companies can produce/supply more, at the same cost.

SubsidySubsidies occur when the government or other entity pays in order to encourage the production of a good or service. This would include the use of corn for ethanol in order to keep gas prices down. Unfortunately it causes the price of dairy products to be more expensive. Not a good trade-off.

How does this affect small farms? What can we do to fix this issue?

Total Product – the total production by a firm or business.

Marginal Product – If a company decides to produce “extra,” this is marginal product.

Marginal Cost – Is the cost associated with an increase in production. The cost per unit will increase exponentialy as resources become more scarce or less suited.

Marginal Revenue – the revenue generated by additional production will eventually decrease as the marginal cost increases.

Eventually the cost of producing excess products will exceed the benefits. At this point it is no longer profitable to produce and sell those products.

Then why does Amazon sell products for a loss? What is the point?

Total Cost – This is the total cost of producing goods and services. Occasionally business will report a loss. How do they continue if they have losses? What can they do to avoid bankruptcy?

Fixed Costs – These are costs that companies will always pay; machines, capital goods. This is also called “overhead.”

Variable Costs – costs, such as labor, and materials can change drastically. Resources can become cheap or expensive overnight, and laborers can be hired and fired immediately.

Tennis Ball Activity

Two students or “owners” will be competing, and will have 45 seconds to get as many tennis balls from one side of the room, into a bucket on the other side. The balls cannot be thrown. You can only hold one at a time. Each tennis ball is worth $5. After the first round an “owner” can “hire” more workers to help move the tennis balls, but at an additional $6 cost. After each additional round, the owners will be able to adjust their strategy, which includes hiring and firing employees.

For each round tally up the costs, revenues, marginal costs, marginal profits, and total costs and profits to determine which company is more efficient.

Break Even Point – Sometimes a company will sell products, but at no additional profits or losses.

Why would companies do this purposely?

E-commerce – business conducted via internet or other electronic platform. EBay, Amazon, and Facebook are all platforms for this. There are even tax benefits to do business this way, as often sales taxes are not charged.

What are some new platforms for purchasing products/services?

PricesPrice – the monetary value of a good or service.

A great man once said “everyone has a price.” He was probably in the mob and buying off the police.

For Mrs. Price, it’s cheap gas station candy.

Rationing – without prices, or in times of need, goods might be rationed. People are only allotted a certain amount and must make do with that.

During WWII, rationing was commonly used in order to preserve supplies and materials for the war effort.

Stop and discuss with your neighbor:How do you rationalize in your daily lives? Do you limit the amount of Halloween candy you eat each day?

Equilibrium Price and Equilibrium Quantity – when the amount of goods companies are willing to sell = the amount of goods consumers are willing to buy.

In this case Mrs. Rice would pay $11 to buy 160 frosted filled chocolate cupcakes from Valero. I have seen her eat 6 in an afternoon.

A surplus is not created when Mr. Rice says Mrs. Rice is spending too much money on gas station food, and she needs to stop.

A surplus is actually created when a minimum price is established above what the market is willing to pay.

Minimum wage is a good example of a price floor. It provides a minimum companies are allowed to pay employees. This creates a large amount of unskilled laborers, as they know they can at least make minimum wage. If minimum wage is increased to $15 an hour, McDonalds will replace its cashiers with order kiosks. This would, in effect, increase the supply of minimum wage workers.

You would think a shortage would be when Mrs. Rice eats all the frosted filled chocolate cupcakes from Valero. But, a shortage is actually created when suppliers do not provide enough of their goods to market, because the know they can get a higher price later. Instead, they keep them in storage until they can make a higher profit. Think bathing suits in December.

In Conclusion• Markets work best when supply and demand determine

the price of goods/services or resources.• When forces other than supply and demand determine the

price of goods/services or resources, surpluses and shortages result.

• Over time, the forces of supply and demand undermine artificial price controls

Ex. Black markets, ticket scalping, undocumented workers