You can view the complete Industry Supply Curve and Cost Curve Analysis presentation here: http://learnppt.com/powerpoint/66_Industry-Supply-Curve.php More business strategy frameworks here: http://learnppt.com/business-strategy.php Industry Supply Curve Analysis is a visual representation of the Law of Supply—and provides insight into competitive pricing and production dynamics. Also includes Cost Curve Analysis (ATC, AFC, AVC, Breakeven Point, and Shutdown Points).

3. The Industry Supply Curve is a graphic representation of the Law of Supply—and provides insight into competitive pricing dynamics Supply Curve Analysis Overview The Industry Supply Curve is graphic representation of the Law of Supply, which states that there is a direct relationship between price and quantity supplied. The Supply Curve slopes upward to the right. The slope tells us that the quantity supplied varies directly with price. Analyzing the Industry Supply Curve also provides insight into competitive pricing dynamics and helps with scenario-based game analysis. The example provided at the end of this document illustrate the impact to price and competition as one player decides to change its production capacity. CUMULATIVE PRODUCTION UNIT PRODUCTION COST Segment 1 Segment 2 Segment 3 Segment 4 Seg 5 S6 Short-run Industry Supply Curve Long-run Industry Supply Curve INDUSTRY SUPPLY CURVE THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

5. Two important points to identify on the Cost Curves are the Breakeven Point and Shutdown Point Cost Curves – MC, Breakeven Point, Shutdown Point PRODUCTION QUANTITY UNIT PRODUCTION COST AVC ATC AFC MC Breakeven Point Shutdown Point Marginal Cost (MC) – the cost of producing 1 unit Breakeven Point is the value when MC = minimum ATC At this point, the company makes no money on the produced goods Shutdown Point is the value when MC = minimum AVC At this point, the company is operating at a loss and is indifferent from continued operations or shutting down temporarily THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

9. Segment 3 can aggressively increase capacity to push out Segment 4 Industry Supply Curve Analysis – Example (cont.) CUMULATIVE PRODUCTION UNIT PRODUCTION COST Segment 1 Segment 2 Segment 3 Seg 4 Segment 5 S6 Segment 3 can drive out Segment 4 by increasing capacity past the Market Demand—this will also lower the overall Market Price (and therefore erode margins). Market Demand Old Market Price New Market Price Overcapacity Added Capacity The New Market Price would likely fall to just below the AVC of Segment 4 ATC AVC THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

10. END OF PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

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