AGENDA Wed 2/8 & Thurs 2/9 Review Demand Quiz Diminishing Marginal Productivity “Lucy!...

AGENDA Wed 2/8 & Thurs 2/9•Review Demand Quiz •Diminishing Marginal Productivity•“Lucy! You’ve got some ‘splainin’ to do!”•Amazing Tortilla•QOD #11: Farmer’s Quandary•Supply Shifts & Graphing Practice•HW: pg 105 #1-9–Study for Supply Quiz•Looking for S&D Project P2

Diminishing Marginal Productivity• Additional units of inputs (resources) result in

diminishing marginal amounts of additional output increases

• As you watch the episode from “I Love Lucy,” write down all the examples of DMP.

QOD #11: Farmer’s Quandary• How does a higher price in diesel fuel result in a

decrease in the supply of bread?• Support your answer by drawing a graph.

Supply Curve Shifts

• a rightward shift means that sellers are willing and able to produce and offer to sell more of a good

• a leftward shift means that sellers are willing and able to produce and sell less of a good.

Supply Curve Shifts

• Exhibit 4-3

Supply then Supply Curve shifts rightward

Supply then Supply Curve shifts leftward

Factors that Cause a Supply Curve Shift• Resource prices• Technology• Taxes• Subsidies

• Quotas• Number of Sellers• Weather

Supply Curve Shift Factors• resource prices: land, labor, capital, and

entrepreneurship–when resource prices fall, sellers are willing

and able to produce and offer to sell more of a good – • P S shifts

–when resource prices rise, sellers are willing and able to sell less of a good – • P S shifts

Supply Curve Shift Factors

• Technology is the body of skills and knowledge relevant to the use of resources in production–advancement in technology is the ability to

produce more output with a fixed amount resources–technology lowers the per-unit cost, or

average cost, of production

Supply Curve Shift Factors

• Taxes is a financial payment made to government–some taxes increase per-unit costs–this causes the manufacturer to

supply less output–the supply curve shifts to the left

Supply Curve Shift Factors

• a subsidy is a financial payment made by government for certain actions–subsidies have the opposite effect of

taxes–because of the subsidy, the quantity

supplied is greater at each price, and the supply curve shifts to the right–removing the subsidy shifts supply left

Supply Curve Shift Factors

• quotas are restrictions on the number of units of a foreign-produced good (import) that can enter a country–ex: Chinese clothing entering EU markets

• number of sellers entering (or leaving) the market• weather may affect the supply–Hurricane Katrina and oil

Change in Supply v. Change in QS• (a) change is supply refers to a shift in the supply

curve–S1 to S2

• (b) change in quantity supplied refers to movement along a given supply curve–A B along supply curve S1 (See Pg. 99)