CHANGES IN SUPPLY
Brianna Coachman
INPUT COSTS
Effects of rising costs: A supplier
sets output at the most profitable level,
where price is equal to marginal cost. If
the cost of inputs increases enough, the
marginal cost may become higher than
the price, and the firm may not be as
profitable as it could be. Supply falls at
each price, and the supply curve shifts to
the left.
Technology: Technology lowers costs
and increases supply at all price levels.
GOVERNMENT’S INFLUENCE ON SUPPLY
Subsidy: is a government payment
or discounted loan that supports a
business or market. The government
often pays a producer a set subsidy for
each unit of a good produced.
Governments in developing
countries often subsidize
manufactures to protect young,
growing industries from strong
foreign competition.
CONTINUED…
Excise tax: is a tax on the production
or sale of a good. An excise tax increases
production costs by adding an extra cost
for each unit sold. An excise cost can
cause the supply of a good to decrease at
all price levels.
Regulation: is government
intervention in a market that affects the
price, quantity, or quality of a good.
SUPPLY IN THE GLOBAL ECONOMY
The supplies of imported goods are
affected by changes in other countries.
Import restrictions also affect the supply
curves of restricted goods. If the
government restricted imports by
establishing an import quota, the supply
curve would shift to the left, but the shift
would be smaller than it would be for an
absolute ban in sugar imports.
OTHER INFLUENCES ON SUPPLY
Future Expectations of Prices: If a seller
expects the price of a good to rise in the
future, the seller will store the goods now in
order to sell more in the future. Expectations
of higher prices will reduce supply now and
increase supply later, and expectations of
lower prices will have the opposite effect.
Number of Suppliers: If more suppliers enter
the market to produce a certain good, the
market supply of the good will rise, and the
supply curve will shift to the right. There us a
positive relationship between the number of
suppliers in a market and the market supply of
the good.
REAL WORLD EXAMPLE
Prices for fossil fuels have rose over the years, and
electric companies have looked for alternative
sources of supply, such as wind.
http://www.youtube.com/watch?v=7EhXOfg9FOM
(2:30)
QUIZ
1. What are 3 factors that cause changes in supply?
2. Can technology help lower prices?
3. Why does the supply curve shift to the left?
4. True or False: Supplies of imported goods are not
affected by changes in other countries.
5. Can regulations cause shifts in the supply curve?
Top Related