Changes in Supply 4.2

1
Changes in Supply 4.2

• Determinants of Supply Factors other than price
  that can change or shift the supply curve.
• Prices of Resources
• Government Tools
• Technology
• Competition
• Prices of related goods
• Producer Expectations

2
Determinants of Supply

• Prices of Resources--Raw materials, electricity,
  workers wages, etc.
• Any of these can increase or decrease a
  businesss production costs.
• Lower costshigher profits
• Producers can supply more product
• Supply curve shifts to the right

3
Government Tools 4.2

• Taxes, Subsidies, and Regulation
• Tax-Required money paid to the government to help
  fund services.
• Taxes add to a businesss production costs
• Higher taxeshigher production costs
• Higher production costslower profits
• SubsidiesPayments to private businesses.
• Ex. Wheat farmersEncourages more

4
Government Tools 4.2

• RegulationRules that the government passes about
  how companies conduct business.
• Ex. Pollution, Safety,
• Strict rulescost and reduce supply
• Loose rulescost less increase supply

5
Technology 4.2

• Powerful tool that makes production more
  efficient and less expensive.
• Ex. Automobiles
• 1900 made 1 at a time
• Assembly line invented
• Costs went downmore profitablemore supply

6
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

7
Prices of Related Goods 4.2

• The supply for one good is connected to the
  supply for its related goods.
• Ex. Wheat Farming
• Price of wheat falls
• Price of corn is up
• Choose to grow corn instead
• Supply of wheat down/Corn supply up

8
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. BasketballsStart of school year
• Demand low nowbut will increase in November
• So, company increases supply now to meet expected
  November demand
• Supply curve shifts to the right

9
The Chicken Farm Exercise

• I. Supply 10 chickens x 5 Eggs/wk. 50/124.2Dz
• Demand 10 Dz./Wk.
• DemandgtSupply Scarcity/Surplus? Price? Supply?
  
• II. Supply 30x5150/1212.5 Dz.
• Demand 10 Dz./Wk.
• SupplygtDemand Scarcity/Surplus?
• Price? Supply?