3 law of supply
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Transcript of 3 law of supply
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In your notes:What is the minimum, per hour I would
have to pay you to work at Subway?Pretend there is no minimum wage and you could work for less than $7.85
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Graph subway workers on board
• Jumping jacks market
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Law of Supply
• As the price of a good increases, producers will produce more (,or try to) quantity. As the price of the good decreases, producers will produce less quantity.
P Qs and P Qs
The supply curve is always
upward sloping
$
Q
S
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For example….• Average prices of • Therefore…..
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Graph one:
A Supply Curve
Price ofWidgets
Number of WidgetsSellers Want to
Sell
$1.00 10
$2.00 40
$3.00 70
$4.00 140
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Producer Surplus• Difference between cost and sale price• IOW: profit
• Sale: $15• Cost: $10• PS = $5
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For example….
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In your groups
• Choose either a computer company or a car company
• Your boss wants your group to figure out how to produce MORE of your goods per year
• Consider every factor of production (land, labor, capital)
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If price changes Q*supply,What changes supply?
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4 Determinants of Supply• Price of production + or –• Resources• Taxes• regulation
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4 Determinants of Supply
• Expectations of future price• If future P$ might rise, hold inventory• If future P$ might fall, increase supply
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4 Determinants of Supply• Sellers (increase or decrease)
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4 Determinants of Supply• Technology
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4 Determinants of SupplyMnemonic
• Price of Production
• Expectations
• Sellers (#)
• Technology
•PEST = supply determinants
•TRIBE = demand determinants
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PEST Changes Assignment1. For each part of PEST, identify one positive
and negative change to the car or computer market and sketch a correctly drawn graph
2. Find an article either on your phone or in a financial magazine, write the headline, the market, part of PEST that is changing and graph it.