Supply & Demand Analysis
Miss Stack
Spring 2008
Economics
SUPPLY
Assignment #6
Warm-up



List 5 producers/sellers you
have visited in the past month.
What did they sell or produce for
you?
List 5 popular things sellers
produce.
What is “Supply?”



How much of a good
producers are willing and able
to offer for sale at each price.
Supply is from the perspective
of the seller
What are some examples of
goods produced by a seller?
Law of Supply


The quantity
supplied is usually
directly related to
its price – the lower
the price, the
smaller the quantity
supplied and the
higher the price,
the greater the
quantity supplied
Why do you think
this holds true?
Quantity Supplied
P
r
i
c
e
P
e
r
P
i
z
z
a
$21
$18
s
$15
$12
$9
$6
$3
$0 12 16
20
24
Millions of Pizzas per week
28
Supply Schedule

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A list of quantity of a product
that producers are wiling to sell
at each price
At which price will sellers willing
to produce the LEAST pizzas?
The MOST?
ONLY PRICES WILL CHANGE
“QUANTITY SUPPLIED”
A Shift/Change in Supply


A change in supply is
determined by factors called
the “Determinants of Supply”
The curve will either shift to the
left (decrease) or right
(increase)
Major factor that causes a
shift in supply

Increase in the
cost of
production =
Decrease in
Supply
Decrease in the
cost of
production =
Increase in Supply

Determinants of Supply

Price of Inputs

Technology

Taxes
Price of Inputs


These are the materials that go into
producing your product
Examples:





Plastic (input)  IPods
Cotton  Roxy Sweatshirts
Fiberglass  Surfboards
If the price of inputs increases, producers
will usually produce less because their
production cost increased.
If the price of inputs decreases, producers
will usually produce more because their
production cost decreased.
Technology

When new
technology is
developed
supply usually
increases
because it
reduces the
cost of
production
Taxes


If taxes charged to producers
increase, sellers will usually produce
less because it increases their cost
of production.
If taxes charged to producers
decrease, sellers will usually
produce more because it decreases
their cost of production.
Supply
Curve




A downward sloping line
As one variable goes up, the other
variable goes down.
It slopes downward because
producers will supply less at
lower prices, more at higher
prices
The supply curve illustrates a inverse
relationship between price & quantity
Supply Curve
(Rightward Shift)

Increases in Supply Curve will
shift to the right
Supply Curve
(Leftward Shift)

Decreases in Supply Curve will
shift to the left
Supply and Demand Graph
Wrap-Up

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When we study Supply we are looking at
whose perspective?
What is the difference between “Quantity
Supplied” and “Change in Supply?”
What are the “Determinants of Supply?”
Define “price of inputs” and give an
example.
Define “taxes” and give an example.
Draw a Demand & Supply Graph-show
Prices, Quantity, & Equilibrium