Chapter 5 Section 3. Effects of Rising Costs ◦ Input costs increase, so does marginal cost ◦...
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Transcript of Chapter 5 Section 3. Effects of Rising Costs ◦ Input costs increase, so does marginal cost ◦...
Shifts In SupplyChapter 5 Section 3
Effects of Rising Costs◦ Input costs increase, so does marginal cost◦ Curve shifts to left
Technology◦ Can lower production costs◦ Curve shifts to the right
Input Costs
Subsidies◦ A government payment that supports a business
or market◦ Lower costs, allows firms to produce more◦ Example: farm subsidies, banks and national
airlines (Europe)
Government Influence on Supply
Taxes◦ Excise tax: tax on the production or sale of a good◦ Reduces the supply◦ Supply curve shifts to the left
Regulation◦ Government intervention in a market that affects
the price, quantity, or quality of a good◦ Typically supply curve shifts to the left
Government Influence on Supply
Changes in the Global Economy◦ US imports oil from Russia. A new oil discovery in
Russia could increase the supply of oil to US market and shift the supply curve to the right.
Future expectations of price Number of suppliers
Other Influences on Supply
If output is bulky or perishable, the firm will produce near consumers
Will locate near inputs if inputs are expensive to transport.
Where Do Firms Produce?
