SupplyChapter 5

What is Supply?

• Supply – refers to the willingness and ability of producers to offer goods and services for sale

• Law of Supply – states that producers are willing to sell more of a good or service at higher price

• (opposite of demand, in which buyers demand more of a LOWER priced item)

Supply Schedules & Supply Curves

•Supply schedule – a table that shows how much of a good or service an individual producer is willing and able to offer at each price (see page 132)• Individual (one person) v. market (all producers)•Supply curve – graph that shows how much of a good or service an individual producer is willing to supply• Individual (one person) v. market (all producers)

Activities

• Complete restating and interpreting economic data worksheet • Complete supply curve worksheet on house cleaning/yard work

What Are the Costs of Production?

•Marginal product – change in total product that results in hiring one more worker• Specialization – having each worker focus on a particular facet of production• Increasing returns – each new worker adds more to total output•Diminishing returns – each new worker causes total output to grow but at a decreasing rate (maybe they get in each others’ way, or not enough work to do, so it is a waste)

Production Costs

• Fixed costs – expenses owners must incur whether they produce anything or not (rent/mortgage, management)• Variable costs – business costs that vary as the level of production changes (worker wages, supplies)• Total costs – fixed plus variable costs•Marginal costs – cost of producing one more of a unit

Earning the Highest Profit

•Marginal revenue – added revenue per unit of output (how much will you make for each unit)• Total revenue – total income for goods sold (Price x Quantity)• Profit maximizing output – when producer realizes the greatest amount of profit

Activity:

• Complete Production Costs and Revenues chart

What Factors Affect Supply?

1. Input Costs2. Labor Productivity3. Technology4. Government Action5. Producer Expectations6. Number of Producers

Activities:

• Fill in Factors that Affect Supply on worksheet (you can work in groups/pairs)

• Once finished, turn over and answer questions on back, identifying which factor is discussed in each statement

Robert Johnson:

•Read about Robert Johnson and BET on page 152

•What effects might BET’s success have on the supply of African-American programming?

What is Elasticity of Supply?

• Elasticity of Supply – measure of how responsive producers are to price changes• Supply is more elastic over a longer period of time, when production can catch up with demand

• Ease of changing production is main factor in changing supply.• It is easier to provide more dog walkers than

cars

Supply Demand Review Video

• https://www.youtube.com/watch?v=LwLh6ax0zTE

• https://www.youtube.com/watch?v=ewPNugIqCUM&src_vid=LwLh6ax0zTE&feature=iv&annotation_id=annotation_3589862329