Topic Supply Copyright ACDC Leadership 2019 1 Supply

Topic: Supply Copyright ACDC Leadership 2019 1

Supply Defined What is supply? Supply is the different quantities of a good that sellers are willing and able to sell (produce) at different prices. What is the Law of Supply? There is a DIRECT (or positive) relationship between price and quantity supplied. • As price increases, the quantity producers make increases. • As price falls, the quantity producers make falls. Why? Because, at higher prices profit seeking firms have an incentive to produce more. Copyright ACDC Leadership 2019 EXAMPLE: Mowing Lawns 2

Example of Supply You own a lawn mower and you are willing to mow lawns. How many lawns will you mow at these prices? Supply Schedule Copyright ACDC Leadership 2019 Price per lawn mowed $1 $5 $20 $50 $1000 Quantity Supplied 3

GRAPHING SUPPLY Supply Schedule Price Quantity Supplied $5 50 $4 40 $3 30 $2 20 $1 10 Copyright ACDC Leadership 2019 Price of Milk Draw this large in your notes $5 4 3 2 1 10 20 30 40 50 60 Quantity of Milk 70 80 Q 4

GRAPHING SUPPLY Supply Schedule Price Quantity Supplied $5 50 $4 40 $3 30 $2 20 $1 10 Copyright ACDC Leadership 2019 Price of Milk Supply $5 4 3 2 1 10 20 30 40 50 60 Quantity of Milk 70 80 Q 5

GRAPHING SUPPLY Price of Milk Supply Schedule Price Quantity Supplied $5 50 $4 40 $3 30 $2 20 $1 10 Copyright ACDC Leadership 2019 Supply $5 4 What 3 if there are new and more productive 2 milking machines? 1 10 20 30 40 50 60 Quantity of Milk 70 80 Q 6

Change in Supply Schedule Price Quantity Supplied $5 50 Price of Milk Supply $5 4 3 $4 40 $3 30 $2 20 $1 10 Copyright ACDC Leadership 2019 2 1 10 20 30 40 50 60 Quantity of Milk 70 80 Q 7

Change in Supply Schedule Price Quantity Supplied $5 50 Price of Milk Supply $5 4 3 $4 40 $3 30 $2 20 $1 10 Copyright ACDC Leadership 2019 2 1 10 20 30 40 50 60 Quantity of Milk 70 80 Q 8

Change in Supply Schedule Price Quantity Supplied $5 50 70 Price of Milk Supply $5 4 3 $4 40 60 $3 30 50 $2 20 40 $1 10 30 Copyright ACDC Leadership 2019 2 1 10 20 30 40 50 60 Quantity of Milk 70 80 Q 9

Change in Supply Schedule Price Quantity Supplied $5 50 70 Price of Milk Supply S 2 $5 4 3 $4 40 60 $3 30 50 $2 20 40 $1 10 30 Copyright ACDC Leadership 2019 2 Increase in Supply Prices didn’t change but there is MORE milk produced 1 10 20 30 40 50 60 Quantity of Milk 70 80 Q 10

Change in Supply Schedule Price Quantity Supplied $5 50 $4 $3 Supply $5 4 What if the price for 40 dairy cows increases 30 drastically? 3 2 $2 20 $1 10 Copyright ACDC Leadership 2019 Price of Milk 1 10 20 30 40 50 60 Quantity of Milk 70 80 Q 11

Change in Supply Schedule Price Quantity Supplied $5 50 Price of Milk Supply $5 4 3 $4 40 $3 30 $2 20 $1 10 Copyright ACDC Leadership 2019 2 1 10 20 30 40 50 60 Quantity of Milk 70 80 Q 12

Change in Supply Schedule Price Quantity Supplied $5 50 Price of Milk Supply $5 4 3 $4 40 $3 30 $2 20 $1 10 Copyright ACDC Leadership 2019 2 1 10 20 30 40 50 60 Quantity of Milk 70 80 Q 13

Change in Supply Schedule Price Quantity Supplied $5 50 30 Price of Milk Supply $5 4 3 $4 40 20 $3 30 10 $2 20 1 $1 10 0 Copyright ACDC Leadership 2019 2 1 10 20 30 40 50 60 Quantity of Milk 70 80 Q 14

Change in Supply Schedule Price Quantity Supplied $5 50 30 Price of Milk Supply S 2 $5 4 3 $4 40 20 $3 30 10 $2 20 1 $1 10 0 Copyright ACDC Leadership 2019 Decrease in Supply Prices didn’t change but there is LESS milk produced 2 1 10 20 30 40 50 60 Quantity of Milk 70 80 Q 15

5 Shifters (Determinants) of Supply 1. 2. 3. 4. Prices/Availability of inputs (resources) Number of Sellers Technology Government Action: Taxes & Subsidies SUBSIDIES A subsidy is a government payment to a business or market. Subsidies cause the supply of a good to increase. 5. Expectations of Future Profit A change in PRICE doesn’t shift the curve. It only causes a movement along the curve. Copyright ACDC Leadership 2019 16

Supply Practice Identify the determinant (shifter) then decide if supply will increase or decrease Shifter Increase or Decrease Left or Right 1 2 3 4 5 6 Copyright ACDC Leadership 2019 17

Supply Practice 1. Which determinant (SHIFTER)? 2. Increase or decrease? 3. Which direction will curve shift? Analyze Hamburgers 1. Strange virus kills 20% of cows 2. Price of hamburgers increase 30% 3. Government taxes burger producers 4. New bun baking technology cuts production time in half 5. The government subsidizes beef producers 6. Minimum wage increases to $20 Copyright ACDC Leadership 2019 18

Supply Practice Identify the determinant (shifter) then decide if supply will increase or decrease Increase or Decrease Left or Right Input Availability Decrease Left NO SHIFT Increase QD Taxes Decrease Left Technology Increase Right Subsidies Increase Right Cost of Input Decrease Left Shifter 1 2 3 4 5 6 Copyright ACDC Leadership 2019 Right along curve 19