Page 1
Name:
Chapter 5: Supply Vocabulary
1. Supply
2. Input
3. Output
4. Supply schedule
5. Supply curve
6. Market supply schedule
7. Market supply curve
8. Law of Supply
9. Direct Relationship
10. Production Costs
A) Fixed costs
B) Variable costs
C) Operating costs
D) Total costs
E) Marginal costs
8. Marginal Product of Labor
A) Increasing Marginal Returns
B) Diminishing Marginal Returns
C) Negative Marginal Returns
Period:
Page 2
9. A firm’s Basic Goal
10. Profit
11. Total Revenue
12. Marginal Revenue
13. The Ideal level of Output
14. Government’s Influence on Supply
A) Subsidy
B) Excise Tax
C) Regulation
STANDARDS: 6.2.12 EFK; 6.3.12 A-F; 6.4.12DE; 6.5.12 ABDF
WEBSITES: http://ecedweb.unomaha.edu/Dem_Sup/supply.htm (Explain supply)
http://www.investopedia.com/university/economics/economics3.asp (Explain supply)
http://www.lemonadestandgame.com (Lemonade stand game)
http://ingrimayne.com/econ//DemandSupply/OverviewSD.html (Explains supply, plus quiz)
Page 3
15. Differences between…
Cause(s)
Price
Quantity
Ceteris Paribus:
Result
Called:
Increase in Quantity Supplied:
Increase in Supply
Decrease in Quantity Supplied:
Decrease in Supply
Page 4
Name:
Chapter 5: The Law of Supply
C) the market supply curve
D) the amount produced
Multiple Choice
1. In a market economy, the amount of a good that
is produced is decided by the interaction of
A) buyers and sellers
B) producers and input suppliers
C) all consumers
D) all producers
2. According to the law of supply, when the price
of a good increases, we would predict that
A) more will be consumed
B) more will be produced
C) less will be produced
D) less will be consumed
3. When the price people are willing to pay for oil
decreases, what would we predict would
happen to the amount of oil produced in any oil
field?
A) It would decline
B) It would increase
C) It would stay the same
D) It would fluctuate up and down
4. To produce more wheat, Farmer Jones has to
use fields that are on a mountain slope, where it
costs $500 more to grow each ton of wheat.
Farmer Jones would only produce from these
fields when
A) The price of wheat increases
B) The cost of wheat increases
C) The price of wheat decreases
D) The cost of wheat decreases
5. John and Kate decide that coffee would be a
good business to be in, so they form J&K
Coffee Co. What will happen to the market
supply of coffee as a result?
A) It will decrease
B) It will increase
C) It won’t change
D) It only changes the price
Word Problem
7. Felix is a wheat farmer who has two fields he
can use to grow wheat. The first field is right
next to his house and the top soil is rich and
thick. The second field is 10 miles away in the
mountains and the soil is rocky. On which field
do you think the opportunity cost of producing
wheat is the highest? Why?
Graphing
8. Below is the supply schedule for Rolling Rock
Oil Co. Plot Rolling Rock’s supply curve on
the chart below.
Price
(dollars per barrel)
$5
10
15
20
25
Quantity Supplied
(barrels per month)
10,000
15,000
20,000
25,000
30,000
30
25
P
R
I
C
E
($)
20
15
10
5
0
6. When we add up all of the individual firm
supply curves, what do we have?
A) nothing important
B) the individual supply curve
5 10 15
20 25 30 35 40
QUANTITY
(In thousands)
Page 5
Name:
Chapter 5: The Supply Curve / Movement of Supply
Section A: Directions: Use the following choices to complete the below questions.
A) Increase in Quantity Supplied
B) Decrease in Quantity Supplied
C) Neither of the Above
1. _____ Occurs because quantity decreases.
5. _____
7. _____
6. _____
8. _____
2. _____ Occurs because price decreases.
3. _____ Occurs because price increases.
4. _____ Occurs because quantity increases.
Section B:
Write True or False on the line to the left. If the answer is FALSE, change it to make it TRUE!
9. ____________ The price of pizza increases, therefore the quantity supplied decreases.
10. ___________ The quantity of shirts decreases, therefore the quantity supplied increases.
11. ___________ A direct relationship between two variables means they move in opposite directions.
12. ___________ The price of oranges decreases, therefore nothing happens to quantity supplied.
13. ___________ A market supply curve is constructed by the horizontal summing of many firms’
supply curves.
14. ___________ Without a change in technology or input prices, opportunity costs of production
increase as more are produced.
15. ___________ Price and Quantity supplied have an inverse relationship.
16. ___________ If price increases, there will be a movement to the right on the supply curve.
17. ___________ If price decreases, there will be a shift to the left on the supply curve.
Page 6
Name:
Chapter 5: Movement and Shifts of Supply
Multiple Choice: (Directions: Use the following choices to complete the below questions 1-10)
A) Increase in Quantity Supplied
B) Decrease in Quantity Supplied
7. _____
C) Increase in Supply
D) Decrease in Supply
1. _____ Occurs because quantity is supplied more.
8. _____
2. _____ Occurs because price increases.
3. _____ Called a “shift to the right”
4. _____ A result of supplying less of a product.
9. _____
5. _____ Happens because price decreases.
6. _____ Considered a “shift to the left”
Multiple Choice
1. The difference between a change in quantity supplied and a change in
supply is that a change in
A) the quantity supplied is caused by a change in a good’s own-price,
while a change in supply is caused by a change in a variable such
as input prices, prices of related goods, expectations, or taxes.
B) Supply is caused by a change in a good’s own-price, while a
change in the quantity supplied is caused by a change in a
variable such a input prices, prices of related goods, expectations,
or taxes.
C) The quantity supplied is a change in the amount people want to
sell. A change in supply is a change in the amount they actually
sell.
D) Supply and a change in the quantity supplied are the same thing.
2. Which of the following will not cause a change in the supply of a
product?
A) a change in the price of suppliers inputs
B) a change in the price of related products
C) a change in the price of the product
D) a change in the expected future price of the product
10. _____
Page 7
Name:
Chapter 5: Supply Shifts
When other factors remain the same, price change results in a movement along the supply
curve; this is called a(n) change in_____________ supplied. When the other important factors (except
price) that effect supplier behavior change (aka: quantity), the entire supply curve _____________. A
change of quantity will cause suppliers to change the amount they produce at any price; this is called a
change in _____________. The variables that shift the supply curve can be recalled by using the
memory device ___________.
“S” Variable Labor, materials, energy, and natural resources are examples of supplier ___________.
An increase in supplier input prices (other things being equal) will make each unit of the good more
costly to produce. Such a change will cause each supplier to offer _____________ goods for sale at
any price; as a result, the supply curve will shift to the _____________.
“P” Variable Like demand, the “P” variable includes goods that can be bought and used together,
called _____________________ and goods that can be used in place of each other, called
________________________. An increase in the price of a substitute will _________________ the
supply of the original product. A decrease in the price of a complement will
_________________ the supply of the original product.
Example: Coca-Cola Company owns the soft-drinks Sprite and Coke and the
restaurant Burger King. If the price of Sprite decreases, the supply of Coke will
____________. Most people eat a Whopper with Coke. If the price of a Whopper
increases, the supply of Coke will _____________. Show this on Graph C.
Graph C
Page 8
“E” Variable If suppliers expect the price of a good will be higher in the future, they will
sell______________ now so that they will have ____________ to sell in the future. If studies have
shown people feel better when they do something, companies will supply
____________ now.
Example: If the price of Coke will be on sale next week, Coca-Cola Company
will sell ____________ cans of Coke now. If studies determine Coke will make
people ill, the Company will supply ________________ of Coke. Show this on
Graph D.
Graph D
“N” Variable The amount of businesses is referred to as the ______________________________.
Example: Throughout the 1990s, we have seen a number of new firms enter the personal computer
business. This has had the effect of _________________ the supply of personal computers.
“T” Variable The T in SPENT reflects the impact of innovation, government, and nature on supply.
The four components of T are ______________, ______________, _______________, and
________________. The introduction of new technology in the steel and shifted the supply curve to
the ____________. Good or normal weather will cause a(n)
_______________ in supply. The implementation of government regulations,
called _______________________ or the introduction of
__________________ will cause the supply curve to shift to the
_______________. Show this on Graph E.
Graph E
Page 9
Name:
Chapter 5: Shifts in the Supply Curve
True or False
1. Ceteris paribus, if the price of timber
increases, we would expect an increase in
the supply of lumber.
2. Ceteris paribus, a change in a good’s ownprice will result in a change in the quantity
supplied of the good.
3. An increase in the number of suppliers
selling a product will result in a decrease in
the supply of the product.
4. When the price of cotton falls, the supply of
barley, which can be grown using the same
land, will increase.
5. Midge point sells Persian carpets in the
United States. If she expects the price of
these carpets will rise next year, she will
increase this year’s supply and sell more
now rather then waiting to sell her stock
next year.
6. Improving technology in an industry
usually lowers the cost of producing the
product and results in a leftward shift in the
supply curve.
7. Government can decrease the supply of a
product by imposing taxes or regulations
that increase the cost of production.
Multiple Choice
8. SPENT is a memory device that stands for
A) shifting, prices, earnings, natural
resources, taxes.
B) Suppliers input prices, prices of related
goods, expectations, number of
suppliers, and four T’s.
C) Supply, price, equal, normal, tastes.
D) Silly putty equals a nice time.
9. El Nino has caused both drought and floodproducing rains in various wheat-growing
regions. What would be the likely affect of
El Nino on the wheat market?
A) an increase in supply
B) a decrease in supply
C) El Nino will not affect supply.
D) A decrease in demand
10. Which of the following actions of
government would not result in a decrease
in the supply of fast-food meals?
A) an increase in the minimum wage that
raises the wages of most workers in the
fast-food industry
B) increased health standards governing
fast-food kitchens
C) decreased property taxes on fast-food
outlets
D) worker safety regulations requiring that
lettuce be chopped with a dull knife
11. Pan Am Airlines went bankrupt in 1998 and
left the airline industry. What is the likely
effect of this change on the airline market?
A) an increase in supply
B) a decrease in supply
C) no change in supply
D) an increase in demand
12. Steel producers offer to sell sheet steel to
U.S. auto producers for a lower price than
in the past. With all other factors remaining
constant, what would you expect to happen
in the auto market?
A) An increase in supply
B) A decrease in supply
C) No change in supply
D) An increase in demand
Page 10
Name:
Chapter 5: Shifts of the Supply Curve—1
1. On the graphs below, show the effects of each of the following on the supply for salsa in
Northampton, PA. Identify the responsible SPENT variable in the space provided.
A. The price of Tomatoes skyrocket.
SPENT variable: ______
B. Congress places a 26% tax on salsa.
D. The amount of suppliers decreases.
SPENT variable: ______
E. Ed Scissorhand introduces a new, faster
vegetable chopper.
SPENT variable: ______
SPENT variable: ______
C. There is a drought were vegetables to make
the salsa is located
F. There is a new tax placed on salsa
SPENT variable: ______
SPENT variable: ______
Page 11
Name:
Chapter 5: Shifts of the Supply Curve—2
2. On the graphs below, show the effects of each of the following on the supply for coffee in
Northampton, PA. Identify the responsible SPENT variable in the space provided.
A. The price of tea has decreased in recent years.
D. There has been abnormally warm
weather were coffee beans are grown.
SPENT variable: ______
SPENT variable: ______
B. Maxwell House has just announced their plan
to stop selling coffee beans.
SPENT variable: ______
C. The price of donuts (eaten with coffee)
has just increased.
SPENT variable: ______
E. There are new regulations placed on
Coffee.
SPENT variable: ______
F. People expect the price of coffee to
increase.
SPENT variable: ______
Page 12
Name:
Chapter 5: Shifts of the Supply Curve—3
3. On the graphs below, show the effects of each of the following on the supply for chocolate chip
cookies in Northampton, PA. Identify the responsible SPENT variable in the space provided.
A. The price of chocolate chip cookies is
Expected to increase.
SPENT variable: ______
B. The price of milk has increased.
SPENT variable: ______
C. Krums is a new maker of chocolate chip
cookies.
SPENT variable: ______
D. Technology has increased, allowing
more cookies to be made.
SPENT variable: ______
E. The price of chocolate chips increases.
SPENT variable: ______
F. People usually get sick after eating
chocolate chip cookies.
SPENT variable: ______
Page 13
Name:
Chapter 5: Shifts of the Supply Curve—4
4. On the graphs below, show the effects of each of the following on the supply for hamburger in
Northampton, PA. Identify the responsible SPENT variable in the space provided.
A. The price of chicken falls.
SPENT variable: ______
B. The price of hamburger buns doubles.
D. The amount of suppliers increases
SPENT variable: ______
E. Workers in Hamburger factories get
a pay increase.
SPENT variable: ______
SPENT variable: ______
C. Scientists find that eating hamburger
prolongs life.
SPENT variable: ______
F. People expect the price of hamburgers
to increase next year.
SPENT variable: ______
Page 14
Name:
Chapter 5: Shifts and Movement Together
The graph below shows different effects on the supply
curves for APPLES in the U.S.
A) If the scenario involves a shift, write “S”; if the
scenario involves a movement, write “M”.
B) Write the correct NEW point that would result in
a movement or a shift.
(The original point is ALWAYS “X”)
C) Then, write the responsible SPENT, if
applicable.
Scenario
1. The price of apples has increased.
2. There is a drought where apples are grown.
3. The price of apples is expected to increase.
4. There is a new supplier of apples.
5. Apples make people live longer.
6. The price of apples decreases.
7. There are increased regulations on apples.
8. The price of oranges has increased.
9. The price of cheese—eaten with apples—
has increased.
10. Apple tax has increased.
Shift (S) or
New
Movement (M) Point
SPENT
variable
Page 15
Name:
Chapter 5: Supply Costs
The amount suppliers charge to consumers is called ______________, whereas the amount it takes
a supplier to make something is called ________________. Costs that stay relatively the same, such as
paying for rent or salaries of managers are referred to as _____________ costs. Costs that fluctuate, such
as paying the wage for a part-time employee for a seasonal position at Blue Mountain, are called
______________ costs. Fixed and variable costs can also included _____________ costs, which are the
amount it takes to run a facility—including the wages of all employees and paying for the electric. When
you add fixed and variable costs (which already include the operational costs), the result is the _________
costs. When a company is determining the cost of producing one more unit of a good, this is referred to
as the _______________ costs.
The change in output from hiring one more person is called the __________________ product of
labor. For example, if a worker can generally make 10 jeans per hour, and you have 2 people working,
how many jeans could your company produce? _______. When you hire one more person, generally, you
want to ______________ your output—this is referred to as ___________________ marginal returns.
Using the above example, if you added a 3rd person and each person was now only able to make 9
jeans per hour, what is the total jeans per hour your company could produce? __________ Although the
output with a 3rd person is greater than it was only 2 people, each person is making less per hour; this is
called __________________ marginal product of labor.
Businesses are extremely careful when hiring individuals because they do not want
_________________ marginal returns to occur—when they hire too many people and everyone gets in
the way of each other. For example, if you would hire a 4th person, each person may only be able to
produce 3 jeans per hour. How many total jeans could they produce? _________
Page 16
Multiplying the quantity sold by the amount sold will equal ________________________. For
example, if you sold 10 bottles of water (quantity), each for $2 a bottle, what is your total revenue? _____
A firm’s basic goal is to maximize ______________. At a very minimum, you want your
______________________ and _______________________ to be the same—anything more is profit.
In order to determine profit, you would use the equation ___________________ minus
______________________. If your total revenue for sneakers was $30 and your cost was $10, what
would your profit be? _________. Businesses also determine how much more they would “bring into
their business” by selling one more unit of a product by calculating the ___________________________.
Chart
Directions: Write the to the letters in the table in the spaces provided below.
Beanbags
(per hour)
0
Fixed
Costs
$36
AAA
2
CCC
BBB
4
5
DDD
Variable
Costs
$0
Total
Costs
$36
Marginal
Costs
--
Total
Revenue
$0
Profit
EEE
44
$8
24
KKK
12
GGG
4
48
0
15
51
3
III
21
20
HHH
5
96
LLL
FFF
63
7
JJJ
57
A ____
H ____
B ____
I ____
C ____
J ____
D ____
K ____
E ____
L ____
F ____
G ____
$-36
Page 17
Key Terms
Scenario
1. Fixed cost + Variable costs =____________________
2. Example of Rent and salaries of people who keep the business running.
3. Costs of producing one more unit of a good
4. Our company sold 5 computers at $1,000. This means my ___________ is
$5,000.
5. Marginal products of labor increases as the number of workers increases.
6. There are ______(a number) of categories of production costs.
7. A firm’s basic goal is to maximize __________________.
8. Marginal product of labor decreases as the number of workers increases.
9. The cost of operating a facility, such as a store or factory.
10. This occurs when a company hires too many workers and the people get in
the way of each other.
11. Total revenue-total costs=_________________
12. Price of each good x numbers of goods sold
13. The additional income from selling one more unit of a good.
14. You add more people to your workforce, but you do not produce as much
output
15. The ideal level of output is where marginal revenue ________ marginal
cost.
Page 18
Name:
Chapter 5: Supply Curve: Shifts of Supply Vocabulary
Key Terms
Scenario
1. When other factors remain the same, price change results in a movement
along the supply curve is called a change in ______________.
2. When the entire supply curve shifts, this is called a change in ___________.
3. Labor, materials, energy, and natural resources are examples of supplier
________________.
4. A change in the weather is characterized as ____________ in the T variable
of SPENT.
5. A shift in the supply curve to the [right/left] represents less output of a good.
6. The supply variable that denote a shift in the supply curve are
____________.
7. New government regulations are characterized as _____________ in the T
variable of SPENT.
Page 19
8. When one good is replaced by another good, this is called ________.
9. A new fast-food restaurant enters the market, what SPENT variable is this?
10. New innovations, such as the computer, are characterized as what spent
variable?
11. If suppliers expect the price of a good to be higher in the future, they will
try to sell the product [now / later].
12. Two goods that are used together are called _________ goods.
13. When both corn and soybeans can be grown on the same farmland, an
increase in the price of corn will result in a(n) _________ in the supply of
soybeans.
14. More output is expressed on a supply curve by a shift in the curve to the
[left / right].
Name:
Chapter 5: Supply : Putting it all together
Problem A: The following are quantities of Orange Juice (OJ) that will be supplied at each price.
Supply Schedule A
Price per OJ container
$1
2
3
4
5
QS of OJ containers
2
4
6
8
10
1. Plot the above on the graph to the right.
Label this Supply curve “A”.
2. What is the Slope for the OJ in the price range $1 and $2?
3. Plot BOTH Supply schedules on the above graph, labeling them appropriately X—for Supply
schedule X and Y—for Supply schedule Y. Then answer problems 4 and 5 below using both
supply schedules and curves.
Page 20
Supply Schedule X
Price per OJ container QS of OJ containers
$1
4
2
6
3
8
4
10
5
12
Supply Schedule Y
Price per OJ container
QS of OJ containers
$1
1
2
2
3
3
4
4
5
5
4. Many, Moe, and Jack form a new OJ company and call it “OJ’s Boys”.
What is the SPENT variable? ______
Which of the above Supply schedules did you use? ____
5. Everyone knows that Sugar is added to OJ containers. The price of Sugar increases.
What is the SPENT variable? ______
Which of the above Supply schedules did you use? ____
6. The price of Apple Juice decreases.
What is the SPENT variable? ______
Which of the above Supply schedules did you use? ____
7. Extremely cold temperatures in Florida damage orange crops.
What is the SPENT variable? ______
Which of the above Supply schedules did you use? ____
8. The government subsidizes orange juice producers.
What is the SPENT variable? ______
Which of the above Supply schedules did you use? ____
9. The Orange-Crop Union in Florida demands a raise for Orange crop workers.
What is the SPENT variable? ______
Which of the above Supply schedules did you use? ____
Page 21
9. Below are the supply schedules ofr Rolling Rock and two other petroleum companies, Armadillo Oil and
Pecos Petroleum. Assuming these three companies make up the entire supply side of the oil market,
complete the market supply schedule and draw the market supply curve.
Price
Quantity Supplied
Rolling Rock
10,000
15,000
20,000
25,000
30,000
$5
10
15
20
25
.
Armadillo Pecos Market
8,000
2,000
10,000
5,000
12,000
8,000
14,000
11,000
16,000
14,000
30
25
P
R
I
C
E
($)
20
15
10
5
0
10 20 30 40 50 60 70 80
QUANTITY
(In thousands)
Page 22