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SUPPLY

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by

Brad Hayes

on 26 September 2016

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Transcript of SUPPLY

SUPPLY
EQUILIBRIUM
PRODUCTION
What MIGHT have happened to cause D1 to shift to D2?

ELASTICITY OF SUPPLY

INPUT COSTS
New Technology might speed up production

An increase in business taxes would __________
production, shifting the supply curve to the ________.

FACTORS THAT CHANGE OVERALL SUPPLY

A price ceiling is a legal maximum that can be charged for a good.

PRICE CEILING/PRICE FLOOR

What MIGHT have happened to cause S1 to shift to S2?

Equilibrium occurs at a price of $3
and a quantity of 30 units.

In economics, an equilibrium is a situation in which:

quantity demanded = quantity supplied

There is no surplus and no shortage

THIS IS THE HAPPY PRICE!

EQUILIBRIUM

GENERALLY, the harder it is to produce something, the more inelastic the supply.



DETERMINING ELASTICITY OF SUPPLY

NUMBER OF SELLERS
CHANGE IN QUANTITY SUPPLIED

A CHANGE IN QUANTITY SUPPLIED shows how a change in
PRICE
affects the
QUANTITY SUPPLIED

The Law of Supply

The law of supply holds that other things equal, as the price of a good rises, its quantity supplied will rise, and vice versa.
A price ceiling is set at $2 resulting
in a shortage of 20 units.

CHANGE IN SUPPLY

The Law of Supply

The supply curve has a positive slope,
consistent with the law of supply.

A shortage occurs when quantity demanded exceeds quantity supplied.
A shortage implies the market price is too low.


SHORTAGE/SURPLUS

Why do producers produce more output when prices rise?
A CHANGE IN SUPPLY is the the effect of
FACTORS OTHER THAN PRICE
on supply.
G
E
T
I
N
GOVERNMENT REGULATIONS
EXPECTATIONS
TECHNOLOGY CHANGES
INPUT COSTS
NUMBER OF SELLERS
Just like with DEMAND, the entire curve will SHIFT
GOVERNMENT
MORE REGULATIONS could _______ production and drive costs _______, shifting the supply curve ______
REGULATIONS, TAXES AND SUBSIDIES
LESS REGULATIONS could ________ production or drive costs _______, shifting the supply curve ______.
An increase in subsidies would allow ________ production, shifting the supply curve to the _______.
decrease
left
increased
right
EXPECTATIONS
If a SUPPLIER EXPECTS that prices will increase soon,
they would _______ overall supply now.
If a SUPPLIER EXPECTS that prices will decrease soon,
they would _______ overall supply.
DECREASE
INCREASE
Think about a gas/oil company. There are three price levels. If they expect that more people
will be on the roads during the summer....what
would they do with their supply, say in the spring?

They would (and do) WITHHOLD the supply
This shifts the supply curve to the LEFT

What would this do to PRICES???
Once this happens...they would INCREASE the
supply at this higher price!
TECHNOLOGY
Broken technology might slow production
Inputs are anything that is used to make a product.
This could be supplies, WORKERS, tools, etc.
IF workers demand higher wages, supply
would ________ and the supply curve would
shift to the _____.
If a number of NEW sellers ENTER a market, the overall supply would ________ and the supply curve would shift to the ________.
If a number of sellers LEAVE a market, the overall supply would ________ and the supply curve would shift to the ________.
INCREASE
DECREASE
RIGHT
LEFT
IF cheaper materials become available, supply
would ________ and the supply curve would
shift to the _____.
DECREASE
INCREASE
LEFT
RIGHT
ELASTICITY, again, is a measure of
HOW much Q reacts to a change in P.
Think about it. Airplanes take a LONG time to produce due to the amount of materials, labor, and regulations placed on them. Even if the prices skyrocketed, there wouldn’t be much producers could do to significantly increase production. Kites, on the other hand, would have elastic supply. If their prices skyrocketed, Kite manufacturers would increase production greatly.
A surplus occurs when quantity supplied exceeds quantity demanded.
A surplus implies the market price is too high.
What results occurred?
What result occurred?
Common examples include minimum wage and agri proeducts
Results in a surplus of a product
A price floor is a legal minimum that can be charged for a good.
Common examples include apartment rentals and credit cards interest rates.
Results in a shortage of a product
A price floor is set at $4 resulting
in a surplus of 20 units.

decrease
increase
left
right
up
down
Think about you and what you'd work for per hour.
SUPPLY

THE DESIRE, ABILITY, and WILLINGNESS TO

PRODUCE SOMETHING.
http://www.history.com/topics/henry-ford/videos/history-of-the-holidays-the-story-of-labor-day
https://www.entrepreneur.com/article/248255
Full transcript