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Supply Report (What Is Supply and Law of Supply)
Supply Report (What Is Supply and Law of Supply)
Supply Report (What Is Supply and Law of Supply)
100 165
75 125
50 75
25 25
Supply Curve
PRICE
120
100
80
60
40
20
0
25 75 125 165
QUANTITY SUPPLIED
Linear Supply curve
Example of linear supply curve
A linear supply curve can be plotted using a simple
equation
P = a + bS
a = plots the starting point of the supply curve on the Y-
axis intercept.
b = slope of the supply curve.
P = 30+0.5(Qs)
Linear Supply curve
• “P.I.G. T.O.E.S”
– P roductivity
– I nputs
– G overnment Actions
– T echnology
– O utputs
– E xpectations
– S ize of Industry
PRODUCTIVITY
– P roductivity (workers, machines, and/or assembly)
SCENARIO #1
Our Xbox factory finds out that our
workers are getting a 25% pay raise
(increase in the cost of labor)…
450
Price per Xbox
400
200
S
0 30 40 50 60 70 80 90
Quantity Supplied
in Billions of Xboxes per Year
INPUTS
– I nputs (Change in the price of materials needed to make
the good)
GOVERNMENT ACTIONS
– G overnment Actions (Subsidies and Taxes)
Effect of tax on supply curve
P = 0 +2Q
P = 5+2Q
P = 30+0.5Q
P = 20+0.5Q
TECHNOLOGY
– T echnology (Improvements in machines and production)
SCENARIO #2
Our Xbox factory invents a
technology that produces twice as
many Xboxs in a day as before.
$500 S
Increase technology =
450 more Xboxs produced S
= increase in the # of
Price per Xbox
400 Xboxs
350
300
250
200
S S
0 30 40 50 60 70 80 90
Quantity Supplied
in Billions of Xboxes per Year
OUTPUTS
– O utputs (Price changes in other products)
EXPECTATIONS
– E xpectations (outlook of the future)
SIZE OF INDUSTRY
– S ize of Industry (Number of companies in the industry)
ARTICLE REVIEW
Any Questions?