Supply EQ What other factors other than price

Supply

EQ • What other factors other than price effect the supply and demand for goods and services?

Essential Terms • Law of Supply Cost of input Productivity Technology Taxes & Subsidies Producer expectations Government Regulations Number of Sellers/competition • Elastic vs Inelastic Supply

What is the #1 factor that drives the supply of a good or service • PRICE IS THE #1 FACTOR • REMEMBER IS ALL ABOUT THE MONEY!! THE MORE THE PRICE OF A GIVEN PRODUCT GOES UP, THE MORE A COMPANY WILL MAKE. • CHASE THE SWEEEEEEET MONEYYYYYY!!

Law of Supply • The Price goes UP, Supply goes UP • The Price goes DOWN, Supply goes DOWN • Why?

Cost of input/added resource • In order to maximize profits, producers must keep their costs associated with their Factors of Production down. • Any added cost will cause an increase in the cost of the good or service to rise. • What will happen if the price rises to much?

Productivity • Being able to produce more of a given product or service with current factors of production will increase the amount a Company can add to a given market and thus make more money.

Technology- Has 2 parts • 1. Technology is tied to Productivity- As technology improves companies can make products faster and cheaper. • Ex. Think about humans being replaced by machines. • 2. As technology improves (Products) become obsolete and thus we discontinue producing that product and shift all factors of production to a new product or service. • EX.

Taxes and Subsidies • Taxes- Can have a positive or negative impact on producers because it drives up the costs. • Ex. Take a look at your phone bill or your paycheck. • The Federal Government and State Governments pay money to producers “Subsidies” to continue to provide a product even at a loss and stay in business. • Ex. Wheat and corn are a staple of the American diet and if a farmer losses money on his crop in year 1, the Government will offset his loss by covering his loss. It does this to keep him growing wheat/corn in the future.

Producer expectations • A company/producer/supplier believes that their will be a bigger demand for their product or service and thus they will produce more of it. • Ex. Basketball shoes are more in demand______? • Ex. Columbia jackets are more in demand______? • Ex. Interactive notebooks are more in demand _____?

Government Regulations • Government Regulations, like taxes have a huge impact on business because of the added costs. • Ex. An increase in the minimum wage. Yup going overseas. .

Number of Sellers/competition • Depending on how many producers/suppliers are in a given industry, it may not be worth starting or maintaining a business in that area. • Or its to hard to get into the market. • Ex. The LOZO BALL SHOE

Products or Services with Inelastic Demand Supply • Price has little or no impact on the Demand. • Few or no substitutes • Often a necessity • Price has little or no impact on the amount supplied • Little or no competition in the market

EQ: • What other factors other than price effect the supply and demand for goods and services?

The Profit Learning Target: I can apply the Determinants of Supply to the Product or service.

Group assignment • Each group needs to take one of the Determinants of Supply and write a student friendly definition and provide examples for the class. These will be written by students in their notebooks. • This is the information they will be using for their test.

The Case of the Epi. Pen • http: //www. nytimes. com/2016/10/08/business/epipen-mylan-justice -department-settlement. html? _r=0

At your table discuss your responses to the following questions: 1. Is the price of the Epi. Pen just simply an issue of supply and demand, not an issue of greed? 2. In a capitalist society/free enterprise system does the government have a role in determining/regulating prices? 3. As an investor would you be willing to take a reduction in your stock price to help in decreasing the price of the Epi. Pen?

Mylan • According to CNBC for Mylan, Epi. Pen is a leading product. • $9. 45 billion in revenue for 2015 — up from $7. 7 billion • $1 billion in revenue comes from Epi. Pen, up from the $200 million in revenue at the time Mylan first acquired the devices. • Mylan expanded the market for Epi. Pens by getting them placed in schools and trying to get them mandated for all airlines flying in the United States, • Mylan didn't have to spend a nickel actually creating the product.

Believed true cost of Epipen • According to the Mercury News; leaving out the box, plastic trainer pen, pen clamp and sets of instructions, some engineers estimate that it really $6. 90 to make two Epi. Pens. • The company’s chief executive, Heather Bresch, recently told a congressional committee her company pays $69 per twopack to the firm that actually manufactures the Epi. Pen, Meridian Medical Technologies, a subsidiary of Pfizer.

Case study: Turing and Daraprim • In 2010 Daraprim cost only $1 a pill. • Core. Pharma bought the rights to market and distribute Daraprim in the U. S. from Glaxo. Smith. Kline. Price hike to $13. 50 a pill • In 2015, Core. Pharma sold the U. S. rights of Daraprim to Turing, which raised the price to a whopping $750 a pill. A 5000% increase. • Daraprim still only costs $1 or $2 a pill abroad. Turing only has the U. S. rights to distribute it.

Reflection: • Given the testimony of the two CEOs have you changed your position on any of the three question?