CHAPTER 5CHAPTER 5

Jeannette Suarez.Jeannette Suarez.Melissa Velazquez.Melissa Velazquez.

Victor Feria.Victor Feria.Rafael Medina.Rafael Medina.

Kevin Sobalvarro.Kevin Sobalvarro.Ximena Lopez.Ximena Lopez.

Period 5.Period 5.3/25/11.3/25/11.

Section 1Section 1

The Law Of SupplyThe Law Of Supply Basically the higher the price, the more of the product Basically the higher the price, the more of the product

gets produced. gets produced. Since the price goes up the consumer must want the Since the price goes up the consumer must want the

goods more so its produced quickergoods more so its produced quicker

http://econperspectives.blogspot.com/2009/07/supply-and-demand.htmlhttp://econperspectives.blogspot.com/2009/07/supply-and-demand.html

Market EntryMarket Entry Market entry means when something at the moment is hot and is Market entry means when something at the moment is hot and is

making a lot of revenue other markets or business joins that market making a lot of revenue other markets or business joins that market

because they understand is doing really good and making its profit.because they understand is doing really good and making its profit.

http://www.limchloe.com/International_Marketing.html

The Supply ScheduleThe Supply Schedule The schedule shows an even The schedule shows an even

amount of price range it gets amount of price range it gets higher and then the production higher and then the production of it. of it.

Prices per slice of Prices per slice of pizzapizza

Slices supplied Slices supplied per dayper day

$.50$.50 100100

$1.00$1.00 150150

$1.50$1.50 200200

Supply GraphSupply Graph* * The supply graphThe supply graph Supply schedule get recorded, which creates a supply cure Supply schedule get recorded, which creates a supply cure

it s like a demand curve. But it measures the quantity of it s like a demand curve. But it measures the quantity of the good with the horizontal axis.the good with the horizontal axis.

AA market supply curvemarket supply curve is to curve the difference in two is to curve the difference in two with two curves. It also shows how different suppliers with with two curves. It also shows how different suppliers with the same good with all different prices.the same good with all different prices.

Supply and ElasticitySupply and Elasticity Elasticity measures how consumers will Elasticity measures how consumers will

react to a change in a price.react to a change in a price. Elasticity of supply is based on the same Elasticity of supply is based on the same

concept, it’s the measure of the way concept, it’s the measure of the way suppliers respond to change in price.suppliers respond to change in price.

Elasticity of supply tells how firms will Elasticity of supply tells how firms will respond to changes in the price of a good.respond to changes in the price of a good.

Example the change in gas.Example the change in gas.

Elasticity of supply and timeElasticity of supply and time

Elasticity of supply in the short runElasticity of supply in the short run In a short run, supply is inelastic whether the In a short run, supply is inelastic whether the

price increases or decreases.price increases or decreases. When supply is elastic a small amount increases When supply is elastic a small amount increases

in price as a big effect on supply.in price as a big effect on supply. An example can be when cotton farms cannot An example can be when cotton farms cannot

respond so fast to the increase of price with respond so fast to the increase of price with soybeans because of the time it takes to produce soybeans because of the time it takes to produce the cottonthe cotton

Elasticity in the long runElasticity in the long run

A supply can become more elastic over time.A supply can become more elastic over time. Just like a demand, supplies can become more Just like a demand, supplies can become more

elastic if the supplier has a long time to respond elastic if the supplier has a long time to respond to a price change.to a price change.

Section 2Section 2

Labor and outputLabor and output

The main question The main question that an owner of a that an owner of a business has is how business has is how many people to hire many people to hire for its business.for its business.

The more people The more people hired the more hired the more production is made by production is made by the company.the company.

Marginal product of laborMarginal product of labor

The marginal product The marginal product of labor is the total of labor is the total output that hiring one output that hiring one more worker gives more worker gives you.you.

Increasing marginal returnsIncreasing marginal returns

Increasing marginal Increasing marginal returns is when you returns is when you hire someone to hire someone to specialize in specialize in something and it something and it increases the increases the production because production because there’s no time there’s no time wasted switching wasted switching tasks.tasks.

Diminishing marginal returns.Diminishing marginal returns.

This is when you start This is when you start hiring too many hiring too many people the production people the production starts to decrease.starts to decrease.

Companies ObjectiveCompanies Objective

A companies main A companies main objective behind all objective behind all company decisions is company decisions is how to maximize how to maximize profits. profits.

Profits-total money Profits-total money made minus the total made minus the total costscosts

ProfitProfit

The profit made is The profit made is dependent on how much dependent on how much of a product the company of a product the company makes and also how makes and also how much they sell the much they sell the particular product forparticular product for

Companies strive to find Companies strive to find a level of output where a level of output where they will end up making they will end up making the most profitthe most profit

Marginal CostMarginal Cost

Additional income for Additional income for selling one more unit selling one more unit of a good.of a good.

Good way to find the Good way to find the best level of output.best level of output.

The best level of The best level of output is when the output is when the marginal revenue is marginal revenue is the same as marginal the same as marginal cost.cost.

ProductionProduction

When the price of When the price of something rises something rises companies strive to companies strive to increase production of increase production of that product.that product.

This is to maximize This is to maximize profits and an profits and an example of law of example of law of supply.supply.

Operating CostOperating Cost

The cost of operating The cost of operating a facility. It includes a facility. It includes variable costs but not variable costs but not fixed costs.fixed costs.

Fixed costs exist Fixed costs exist whether the factory is whether the factory is open or not.open or not.

There are times when There are times when keeping a money keeping a money losing factory open is losing factory open is the best choice.the best choice.

Section 3Section 3

Input Cost: Input Cost:

*Some factors can affect the price levels.*Some factors can affect the price levels.

*Any materials, machinery, or labor use to make a good will affect *Any materials, machinery, or labor use to make a good will affect supply if the cost is changed.supply if the cost is changed.

Effect of rising cost:Effect of rising cost:**A supplier sets output where price is equal to marginal cost.A supplier sets output where price is equal to marginal cost.

*Marginal cost includes the cost of the production.*Marginal cost includes the cost of the production.

*If the marginal costs rise the less profitable it can be.*If the marginal costs rise the less profitable it can be.

*If a firm can’t control the price, the production is cut until it’s equal. *If a firm can’t control the price, the production is cut until it’s equal.

Technology:Technology:* Technology can lower production costs in industries. * Technology can lower production costs in industries.

* Robots and computers can replace workers and therefore makes the * Robots and computers can replace workers and therefore makes the workers get lower salaries.workers get lower salaries.

* Technology lowers costs and increase supply at all price levels.* Technology lowers costs and increase supply at all price levels.

Government Influence on supply:Government Influence on supply:* Government has the power to affect the supplies of many goods by:* Government has the power to affect the supplies of many goods by: -Raising the cost -Raising the cost - Lowering the cost- Lowering the cost

Subsidies:Subsidies:*Subsidy: is a government payment that supports a business or market.*Subsidy: is a government payment that supports a business or market.

*Government often pays a producer a set subsidy for the goods produced.*Government often pays a producer a set subsidy for the goods produced.

* Some countries an their government have their reasons for * Some countries an their government have their reasons for subsidizing producers. For example;subsidizing producers. For example;

-Europe: Food shortage during WWII-Europe: Food shortage during WWII-France: Farms, to protect the lifestyle and character.-France: Farms, to protect the lifestyle and character.

*Government subsidizes manufacturers to protect young, grown industries from *Government subsidizes manufacturers to protect young, grown industries from strong foreign competition.strong foreign competition.

Taxes:Taxes:*Excise tax- a tax on the production or sale of a good.*Excise tax- a tax on the production or sale of a good.

*Increases production costs and adds an extra cost.*Increases production costs and adds an extra cost.

*Excise taxes can sometimes discourage the government thinks are harmful.*Excise taxes can sometimes discourage the government thinks are harmful.

Regulation:Regulation:

*Regulation- government intervention in a market that affects the *Regulation- government intervention in a market that affects the production of a good.production of a good.

*Some regulations can increase the cost of manufacturing cars and reduce *Some regulations can increase the cost of manufacturing cars and reduce the supply. It can shift to the left. the supply. It can shift to the left.

SourcesSources

* Economics book * Economics book

*http://www.google.com/images?*http://www.google.com/images?hl=en&source=hp&biw=1436&bih=715&q=money&btnG=Search+Images&gbv=2&aqhl=en&source=hp&biw=1436&bih=715&q=money&btnG=Search+Images&gbv=2&aq=f&aqi=&aql=&oq==f&aqi=&aql=&oq=

*http://www.allbusiness.com/glossaries/input-cost/4943725-1.html*http://www.allbusiness.com/glossaries/input-cost/4943725-1.html

*http://www.habitationtips.com/index.php*http://www.habitationtips.com/index.php