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CHAPTER 5— THE SUPPLY CHAPTER

CHAPTER 5— THE SUPPLY CHAPTER. 5.1 “What is supply?”. 2 Curves— Supply & Demand : Which one is which?. Why does supply increase as price increases?. Let’s think about it. If you could tutor a kid after school, would you do it for… $1/hr? $5/hr? $7.50/hr $10/hr? $20/hr?

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CHAPTER 5— THE SUPPLY CHAPTER

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  1. CHAPTER 5—THE SUPPLY CHAPTER 5.1 “What is supply?”

  2. 2 Curves—Supply & Demand: Which one is which?

  3. Why does supply increase as price increases? • Let’s think about it. • If you could tutor a kid after school, would you do it for… • $1/hr? • $5/hr? • $7.50/hr • $10/hr? • $20/hr? • If yes, is this price high enough where you would be willing to work more than 1 hr/week? How about 5 hours at this price? Or 20 hours? • $30/hr? • $50/hr? • $100/hr? • $250/hr?

  4. Duh The supply of students willing to stay after school for $250/hr is much greater than the supply willing to stay for $1/hr

  5. Does supply apply only to labor? • In other words, as the price increases, would the production of GOODS also increase? • Personal Examples SUPPLY SCHEDULE OR SUPPLY CURVE?

  6. Classwork • Ch. 5.1 Definition • Subsidy • Identify and briefly describe the 7 reasons why changes in supply occur (p. 116-118).

  7. What would cause THIS to happen?

  8. Reasons for Change in Supply? • Cost of Inputs • Productivity • Technology • Taxes and Subsidies • Expectations • Government Regulations • Number of Sellers

  9. Supply Elasticity • If a small increase in price leads to a relatively larger increase in output, supply is ____________. INELASTIC ELASTIC

  10. Difference between demand & supplyelasticity? • Not much • D.E. – quantities are being purchased • S.E.– quantities are brought to market for sale • Don’t forget: Elasticity is simply a measure of the way quantity adjusts to a change in price.

  11. I need a… • Explain why the first is inelastic and the second is elastic.

  12. Tickle Me Economics • Dec. 1996: Tickle Me Elmo was the hottest toy of the season • Regular price--$23.99; Advertised in newspapers for as much as $500 • Did the company want to supply more? • Since manufacturing could not keep up with the demand, there was a temporary ____________ of supply. INELASTICITY

  13. The supply curve for products that can be made quickly without huge amount of capital and skilled labor is ________. • ELASTIC • Kites, candy, etc. • INELASTIC • Planes, shale oil ***Unlike demand, ONLY production considerations determine supply elasticity.*** (Substitutes, ability to delay purchase, etc. are not important for supply elasticity)

  14. Finally (for this section)… • Unit Elastic Supply • KEY WORD: PROPORTIONAL (change)

  15. AND NOW… SOME OF THEN… “THE MICHIGAN ADVANTAGE”

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