Ch03-parkin10e-student.ppt

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Figure 3.4 shows a supply curve of energy bars. A rise in the price of an energy bar, other things remaining the same, brings an increase in the quantity supplied. Supply Minimum Supply Price A supply curve is also a minimum-supply-price curve. As the quantity produced increases, marginal cost increases. The lowest price at which someone is willing to sell an additional unit rises. This lowest price is marginal cost. Supply A Change in Supply When some influence on selling plans other than the price of the good changes, there is a change in supply of that good. The quantity of the good that producers plan to sell changes at each and every price, so there is a new supply curve. When supply increases, the supply curve shifts rightward. When supply decreases, the supply curve shifts leftward. Supply The five main factors that change supply of a good are The prices of factors of production The prices of related goods produced Expected future prices The number of suppliers Technology State of nature Supply Prices of Factors of Production If the price of a factor of production used to produce a good rises, the minimum price that a supplier is willing to accept for producing each quantity of that good rises. So a rise in the price of a factor of production decreases supply and shifts the supply curve leftward. Supply Prices of Related Goods Produced A substitute in production for a good is another good that can be produced using the same resources. The supply of a good increases if the price of a substitute in production falls. Goods are complements in production if they must be produced together. The supply of a good increases if the price of a complement in production rises. Supply Expected Future Prices If the expected future price of a good rises, the supply of the good today decreases and the supply curve shifts leftward. The Number of Suppliers The larger the number of suppl