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Changes in Supply 4.2

Changes in Supply 4.2. Determinants of Supply : Factors other than price that can change or shift the supply curve. Prices of Resources— Government Tools Technology Competition Prices of related goods Producer Expectations. Determinants of Supply.

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Changes in Supply 4.2

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  1. Changes in Supply 4.2 • Determinants of Supply: Factors other than price that can change or shift the supply curve. • Prices of Resources— • Government Tools • Technology • Competition • Prices of related goods • Producer Expectations

  2. Determinants of Supply • Prices of Resources--=Raw materials, electricity, workers wages, etc. • Any of these can increase or decrease a business’s production costs. • Lower costs=higher profits • Producers can supply more product • Supply curve shifts to the right

  3. Government Tools 4.2 • Taxes, Subsidies, and Regulation • Tax-Required money paid to the government to help fund services. • Taxes add to a business’s production costs • Higher taxes=higher production costs • Higher production costs=lower profits • Subsidies—Payments to privatebusinesses. • Ex. Wheat farmers—Encourages more

  4. Government Tools 4.2 • Regulation—Rules that the government passes about how companies conduct business. • Ex. Pollution, Safety, • Strict rules—cost $ and reduce supply • Loose rules—cost less $ increase supply

  5. Technology 4.2 • Powerful tool that makes production more efficient and less expensive. • Ex. Automobiles— • 1900 made 1 at a time • Assembly line invented • Costs went down—more profitable—more supply

  6. Competition 4.2 • Competition increases supply • Lack of competition decreases supply • Why? • Demand for product grows • Encourages competitors to enter market • Supply curve shifts to the right

  7. Prices of Related Goods 4.2 • The supply for one good is connected to the supply for its related goods. • Ex. Wheat Farming • Price of wheat falls • Price of corn is up • Choose to grow corn instead • Supply of wheat down/Corn supply up

  8. Producer Expectations 4.2 • The expectations suppliers have of future changes in the price of their products can affect how much to supply now of a product. • Ex. Basketballs—Start of school year • Demand low now—but will increase in November • So, company increases supply now to meet expected November demand • Supply curve shifts to the right

  9. The Chicken Farm Exercise • I. Supply: 10 chickens x 5 Eggs/wk. =50/12=4.2Dz • Demand: 10 Dz./Wk. • Demand>Supply; Scarcity/Surplus? Price? Supply? • II. Supply: 30x5=150/12=12.5 Dz. • Demand: 10 Dz./Wk. • Supply>Demand; Scarcity/Surplus? • Price? Supply?

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