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Changes in Supply

Changes in Supply. Chapter 5 Section 3 Mr. Lopez Per.4 Economics. Input Costs. Any change in the cost of an input used to produce a good will affect supply A rise in the cost of an input will cause a fall in supply at all price levels because the good has become more expensive to produce

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Changes in Supply

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  1. Changes in Supply Chapter 5 Section 3 Mr. Lopez Per.4 Economics

  2. Input Costs • Any change in the cost of an input used to produce a good will affect supply • A rise in the cost of an input will cause a fall in supply at all price levels because the good has become more expensive to produce • A fall in the cost of an input will cause an increase in supply at all price levels

  3. Effect of Rising Costs • Marginal Revenue vs. Marginal Cost • Marginal Revenue: (price) the additional income from producing one more unit of a good • Marginal Cost: the cost of producing one more unit of a good (includes price of input) -As supply increases it rises • Technology helps lower production costs and increases supply

  4. Government’s Influence on Supply • Regulation: Govt. intervention in a market that affects the price, quantity or quality of a good • The govt. can affect supply of many goods by changing revenue or production through subsidies and/or excise taxes

  5. Government’s Influence on Supply • *SUBSIDIES: a govt. that supports a business or market -given to protect a young industry from strong foreign competition -they allow the supply of a good to increase by lowering marginal cost at all levels of output • *EXCISE TAX: Tax on production or sale of a good -increases production cost -used to discourage the sale of goods who the govt. believes is harmful to public health Ex. Alcohol

  6. Supply on Global Economy • It’s cheaper to produce a good in other countries • Do to govt. regulations, producers go to other countries • Other influences on Supply: -Future Expectations of Prices -Number of Suppliers

  7. 3 Critical Questions: • What role does the government play in influencing supply? • What does excise tax do to the supply curve? What does a subsidy do? • How does technology influence supply?

  8. Answers: • 1: The government can influence supply by changing the revenue or production by providing subsidies/excise taxes • 2: It shifts the demand curve to the right and a subsidy allows the supply of a good to increase by lowering marginal cost at all levels of output • 3: Technology influences supply by increasing the rate of production and it’s cheaper for the producer since they don’t have to pay for labor.

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