1. Bellringer
03/28/2014
1. If the price of coffee is decreasing, how do you
predict firms will react?
2. Why are coffee shops more common now than it
was 5 years ago?
Starbucks Barista
Mr. Klein???

2. Smart Phones

3. Pizza

4. Many factors can affect supply of a
specific product or service.
What might cause a change in supply?

5. • When price changes, quantity
supplied will change. That is a
movement along the same supply
curve.
• When factors other than price
changes, supply curve will shift.

6. Four Major Determinants of Supply
 Price of Inputs (production) increasing or
decreasing
 Resources
 Wages
 Taxes / Regulations
 If the price of inputs needed to make a
product drops, producers can supply
more at a lower production cost.
S₁
$ per
input
Q*Supplied
S₂

7. Four Major Determinants of Supply
 Expectations of future price
 If future P$ might rise, hold
inventory
 If future P$ might fall, increase
supply

8. Four Major Determinants of Supply
 Number of Firms in the Industry
 In other words Sellers
 Increase or Decrease
 More sellers in the market
increase supply (vice versa)

9. Four Major Determinants of Supply
 Technology
 The use of science to
develop new products
and new methods for
producing / distributing
goods and services.
 Improvements in tech
S

10. Four Major Determinants of Supply
 Price of Production
 Expectations
 Sellers (Number)
 Technology
 PEST = supply determinants
 TRIBE= demand determinants

11. PEST Assignment
Identify part of PEST (spelt out)
Graphically sketch the changes to the supply curve
Remember to Label your graphs
1. Price decreases (memory chips used to make computers)
2. Machines make new dog houses
3. Wages increases for a Computer Firm
4. Government imposes taxes on men’s ties
5. Future prices of production might fall (ipads)
6. Taxes decrease by 2% (pizza)
7. Metal goes up 10% (car industry)
8. More stores enter the market (DVD)
9. Rubber decreases in cost (shoe industry)
10. Make up your own example and show supply shift
$
Q
S