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
