Basic Economic Concepts Supply Goals Correctly label and

Basic Economic Concepts Supply

Goals • Correctly label and graph a supply curve and shift. • Describe the Law of Supply. • Differentiate between revenue and profit. • Identify an increase and decrease in supply. • Identify the determinants of supply and their effect on the shifting of the supply curve.

I. Supply: • Units of a product offered for sale by producers Law of Supply: • Producers will provide more a product when the price is higher and less when the price is lower

I. Supply Costs of Production: • Fixed Costs: costs that do not change, no matter how much of the product is produced. • Variable Costs: costs that rise and fall depending upon the quantity produced. Total Costs = fixed costs + variable costs

I. Supply The goal of firms is to maximize profit. Revenue = Profit + Total Cost Profit = Revenue – Total Cost

II. Determinants of Supply Changes of Resource Prices: • change in the price of materials used to make a product will cut into profits and force producers to change supply.

II. Determinants of Supply Number of Sellers in the Market: • the more producers in the market the larger the quantity supplied.

II. Determinants of Supply Government Intervention: • by raising and lowering the cost of producing goods the government can encourage or discourage sellers. Subsidies Excise Taxes • Government payment to support a business or market • Ex. Subsidies on corn • Taxes placed on the sale or production of a good • Ex. Taxes on cigarettes

II. Determinants of Supply Price of Other Goods: • when there is an increase in price for one of two products that require similar resources, sellers will switch production to more of the cheaper good.

II. Determinants of Supply Producer Expectations: • their expectations of the future can impact their willingness to supply a product.