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NON PRICE FACTORS THAT CAN SHIFT AN ENTIRE
SUPPLY CURVE
Determinants of Supply
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Cost of Resources
Cost of resources = cost of production. Prices of the resources needed to produce a good or service
Cost increases = supply decreasesCost decreases = supply increases
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Technology
Technology will always increase supply in the long run.
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Competition
Competition is referring to the number of products available in the market
Ex. Puffs 100 Kleenex 100 Kroger brand 100 Total 300
If Puffs goes out of business there are less products available in the market. There would only be 200 available.
Comp. increases = supply increases (# available goes up) Comp. decreases = supply decreases (# available goes
down)
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Government is also a determinant, but first
Watch Stossel and government subsidy’s.
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Government
Government regulations on producers can influence supply
Taxes – what a business must pay to the government
Regulations – rules that must be followed (pollution)
Subsidies – payments for doing what the gov wants
Ex. Taxes increase = supply decreases (less to spend)
Taxes decrease = supply increase (more to spend)
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Producer expectations
If producers expect a product to be demanded in the future, they will produce it NOW on the expectation they will make money on it down the road.
Ex. – Halloween candy is made in the spring.
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Prices of Related Goods
A related good is one that is similar to the good you are currently producing.
Ex. Brush and a comb You are currently producing brushes. You
notice that the price of combs is increasing . You think you could make a better profit on combs. Therefore, you switch your production to the related good (combs) to increase the possibility of a profit.
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The 6 Determinants of supply
1. Cost of resources2. Technology3. Competition4. Government5. Producer expectations6. Price of related goods
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Changes in a supply curve
The right is still an increaseThe left is still a decrease
SC3
decrease SC1
increase
SC2
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Worksheet
Fun time!! Complete the worksheet on supply for ecobits. It is a grade