Quiz Returned Law of Supply Homework Supply and

¡Quiz Returned ¡Law of Supply ¡Homework ¡Supply and Demand ¡Worksheet ¡Homework n. Read Naked Economics, Chapter 1 n. Review Powerpoint for next class (online) n. Read “Current Reading Assignment” (online)

QUIZ RETURNED

Law of Supply n n n When price increase, the quantity supplied increases. When price decreases, the quantity supplied decreases. P Qs , P Qs A direct relationship.

n A Supply Schedule is a table that relates Price (the driver) to Quantity supplied (the responder) P Qs This is a Supply Schedule

n The Law of Supply can be represented graphically Price Supply Curve Quantity Why does the Supply curve go “low to high”? Because when price is high, quantity supplied is high And when price is low, quantity supplied is low.

Shifts of the Supply Curve Price Supply Curve Decrease Increase Quantity I = R, D = L still applies

ELASTICITY OF SUPPLY n How sensitive are suppliers to a change in price n P Qs = Elastic Supply n P Qs = Inelastic Supply Remember…Law of Supply still applies

Length of time to produce the good or service is the main determinant of the elasticity of supply The longer it takes to produce the good or service, the more inelastic. Helpful Hint…Inelastic is the long word and that takes a long time to produce

Supply curves, elastic and inelastic Price Inelastic Long time to produce Ex. Airplanes, gasoline, wine Elastic Short time to produce Ex. Hamburgers, bottled water, music files Quantity

Questions on supply 1. What is the law of supply? (a) the lower the price, the larger the quantity supplied (b) the higher the price, the larger the quantity supplied (c) the higher the price, the smaller the quantity supplied (d) the lower the price, the more manufacturers will produce the good 2. What happens when the price of a good down? (a) existing producers will expand some new producers will enter the market (b) some producers will produce less and others will drop out of the market (c) existing firms will continue their usual output but will earn less (d) new firms will enter the market as older ones drop out

Government Influences on Supply By raising or lowering the cost of producing goods, the government can encourage or discourage an entrepreneur or industry. Subsidies A subsidy is a government payment that supports a business or market. Subsidies cause the supply of a good to increase. Taxes The government can reduce the supply of some goods by placing an excise tax on them. An excise tax is a tax on the production or sale of a good. Regulation occurs when the government steps into a market to affect the price, quantity, or quality of a good. Regulation usually raises costs.

Shifts of the Supply Curve Price Taxes & Regulation Supply Curve Subsidies Quantity What is the effect on price?

Government Influences on Supply EXAMPLES? Subsidies Taxes Regulation

Government Influences on Supply EXAMPLES? Subsidies…Electric Cars, College education, “green industries” Taxes…Cigarettes, alcohol, green house gases Regulation…. Cars, Housing OTHERS?

THREE MINUTE BREAK http: //www. online-stopwatch. com/bombcountdown/

Supply and Demand Putting Supply and Demand together Take out a piece of paper

Supply and Demand Putting Supply and Demand together Price Quantity

Supply and Demand Draw a Demand Curve Price Quantity

Supply and Demand Draw a Demand Curve Price Demand Quantity

Supply and Demand Add a Supply Curve Price Demand Quantity

Supply and Demand Add a Supply Curve Supply Price Demand Quantity

Supply and Demand Reading the graph Supply Price 5 Parts to a fully labeled Supply and Demand graph 1. Price 2. Quantity 3. Supply 4. Demand 5. Equilibrium Demand Quantity

Supply and Demand Equilibrium determines market price and market quantity. Supply Price 5 Parts to a fully labeled Supply and Demand graph 1. Price 2. Quantity 3. Supply 4. Demand 5. Equilibrium Demand Quantity

Supply and Demand Now show the effect of an increase in demand Supply Price Equilibrium Demand Quantity

Supply and Demand Increase shifts the curve to the right (remember…I = R, D = L) and changes the equilibrium (i. e. price and quantity) Supply Price New Equilibrium Demand Quantity

Supply and Demand Increase shifts the curve to the right (I = R, D = L) and changes the equilibrium (i. e. price and quantity) Supply Price New Equilibrium Demand Quantity

Supply and Demand What was the effect on price and quantity? Supply Price New Equilibrium Demand Quantity

Supply and Demand What was the effect on price and quantity? Supply Price Equilibrium Demand Quantity

Student Video http: //www. youtube. com/watch? v=x. GRm. F 8 jd. Atw

worksheet

Taxes and subsidies What’s the public benefit that justifies the Government’s action (the tax)? What are the unintended consequences of the Government’s action? What are other alternatives for the Government to achieve the goal?

Let’s see if we got it… http: //www. wnyc. org/story/101889 morning-coffee-costs-more/ draw a fully labelled (five parts) supply and demand curve explaining what’s going on

Supply and Demand Curve

Shortages and Surpluses Supply Price Equilibrium SHORTAGE = Price BELOW the equilibrium price Supply is less than Demand. SHORTAGE Demand Quantity

Shortages and Surpluses Supply Price Equilibrium What happens when there is a shortage of something? SHORTAGE Demand Quantity

Shortages and Surpluses Demand is less than supply Supply Price SURPLUS Equilibrium SURPLUS = Price ABOVE the equilibrium Price. Demand Quantity

Shortages and Surpluses Supply Price SURPLUS Equilibrium And what happens when there is a surplus of something? Demand Quantity

Homework Review Powerpoint for next class (online) Read “Current Reading Assignment” (online) Read Naked Economics, Chapter 1…“Who Feeds Paris? ” Helpful Hint…as you read Chapter One of Naked Economics, ask yourself “How does it relate to Supply and Demand? ”

Homework Read Naked Economics, Chapter One Helpful Hint…as you read Chapter One, how does it relate to Supply and Demand?