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Consumer Economics
Supply Notes
Home | overview | final exam review | Unit 1 Economic Thinking | Unit 2 Investments | Unit 3 personal finance | Unit 4 Demand/Supply

Determinants of Supply


1.      Input prices

2.          Alternatives/Substitutes

3.          Technology

4.          Expectations

5.          Number of sellers in a given market



Supply Determinant Questions


Why did so many farmers leave farming to go into other careers?


Better alternatives, low market value for crops, prospect of increased competition from foreign producers, high equipment costs


When many producers leave a market, what is likely to happen to the quantity produced at any given price?


Quantity will fall.  A supply curve shift to the left.  This is because the determinant (Few sellers) has changed.















Supply Determinants


Which direction does the supply curve shift for the following scenarios?


1.      The supply of cars when open-trade agreements bring in new producers.


(Right: increase in producers)


2.      The supply of coffee when freezing temperatures hit the major coffee-producing regions of Brazil and Costa Rica.


(Left: Natural disaster decreases inputs)


3.      The supply of lumber when a new computer-assisted saw reduces the cost of lumber production.


(Right: New technology decreases production costs)


4.      The supply of gasoline today if there is an expected shortage and higher prices likely to occur next week.


(Left: Sellers want higher future prices, so they will decrease their supply today)












Supply Determinants



1.      The law of supply states:

a. There is a positive relationship between price and quantity       supplied.

          b.The graph of supply curve is a downward sloping line

          c. People  usually supply fewer goods and services

          d. People’s behavior in the marketplace is unpredictable


2.      When the price of an item changes, producers will usually:

a. Look at how the price change influences the relative value of       their alternatives.

          b. Disregard a small change in price

          c. Assume the item is on sale and produce more

          d. None of the above


3.          Which item will not change the supply for a good or service?

          a. Expectations

          b. Number of sellers

          c. Price

          d. Change in technology

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