03 law of supply
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Transcript of 03 law of supply
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What is the minimum, per hour I would have to pay you to work at Subway?
MANKIWCHAPTER 4 ALL WEEK
Pretend there is no minimum wage and you could work for less than $7.50
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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 Q and P Q
The supply curve is always
upward sloping
$
Q
S
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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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For example….• Average prices of
• Therefore…..
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For example….
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Producer Surplus• Difference between cost and sale price
• IOW: profit
• Sale: $15
• Cost: $10
• PS = $5
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If price changes Q*supply,What changes supply?
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4 Determinants of Supply
• Price of production + or -• Taxes, regulation, raw
materials, labor
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4 Determinants of Supply
• Expectations
• If future P$ 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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Diff between supply and DemandXbox games
• Supply or demand change?
• Determinant
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Diff between supply and DemandWheat
• Supply or demand change?
• Determinant
locusts
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Diff between supply and DemandNew cars
• Supply or demand change?
• Determinant
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Diff between supply and DemandUsed clothing
• Supply or demand change?
• Determinant
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Diff between supply and DemandDog food
• Supply or demand change?
• Determinant
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Diff between supply and DemandDog food
• Supply or demand change?
• Determinant
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Diff between supply and DemandSalsa
• Supply or demand change?
• Determinant
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Diff between supply and DemandSalsa
• Supply or demand change?
• Determinant
CLOSED
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Diff between supply and Demand Salsa
• Supply or demand change?
• Determinant
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Diff between supply and DemandInsurance plans
• Supply or demand change?
• Determinant
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TRIBE
Assignment due next Thurs or Fri
For each part of the:
Formulate two scenarios and graph For example:Beef marketConsumers see news story about mad cow disease