Economics 4/11/11 http://mrmilewski.com

• OBJECTIVE: Demonstration of Chapter#4 and begin examination of supply.

• I. Administrative Stuff-attendance & distribution of test

• II. Chapter#4 Test• III. Journal #15 pt.A

-Examine Figure 5.1 & Figure 5.2 p.114&1151.) How does the Law of Supply differ from the Law of Demand?2.) Why are the supply curves upward sloping?

• IV. Journal #15 pt.B-notes on supply

Law of Supply

• The principle that suppliers will normally offer more for sale at higher prices and less at lower prices.

• As price goes up, quantity produced also goes up

Supply Curve:• At high prices more

will be supplied. At lower prices, less will be supplied.

• Price and quantity supplied are directly related.

• The drawing to the right is a typical supply curve.

Supply Schedule• Supply schedule is just

like the demand schedule, but the supply schedule shows both quantity supplied and price rise together.

Quantity Supplied

Construct a Supply curve using the following data

Quantity Supplied

On your supply curve

• Label the point where price is $15 and quantity supplied 4 units as point a.

• Next label the point where price is $20 and quantity supplied is 6 units as point b.

• Movement from point a to point b, or to any other point along the supply curve is movement in quantity supplied.

Movement along the Supply Curve/ Change in quantity supplied.

Change in supply• A change in supply

occurs when something happens to cause suppliers to offer different amounts of products for each price in the market.

Change in supply• A change in supply

occurs when something happens to cause suppliers to offer different amounts of products for each price in the market.

What can cause a change in supply to the right?

• Lower cost of inputs such as cheaper labor or cheaper packaging

• More productive/better trained labor.• New technology like more fuel efficient delivery

vehicles, better/faster machines• Lower taxes/government subsidies (subsidy is a

government payment to an individual or business to encourage or protect a certain economic activity.)

What can cause a change in supply to the left?

• More expensive labor• Higher taxes• Less efficient workers• Broken technology• Withdrawal of

subsidies

Economics 4/12/11 http://mrmilewski.com

• OBJECTIVE: Examine supply elasticity.• I. Journal #16 pt.A

-Read “Profiles in Economics” p.121-Answer question #1 p.121

• II. Return of Chapter#4 Test• III. Quiz #9• IV. Journal #16 pt.B

-notes on the elasticity of supply

• V. Econ U.S.A. episode#16-questions on film

Supply Elasticity

Type of Elasticity Change in Quantity Supplied Due to a Change in Price

Elastic More than proportional

Unit Elastic Proportional

Inelastic Less than proportional

Supply Elasticity• Supply elasticity is caused by the ability of

a producer to change output.

• If producers can increase output quickly, supply is elastic.

• If producers can not increase output quickly, supply is inelastic.

Theory of Production• The relationship between the factors of

production (land, labor, capital, entrepreneurs) and output of goods and services.

• Short run – change in the variable of labor

• Long run – change in land & capital

Economics 4/13/11 http://mrmilewski.com

• OBJECTIVE: Examine supply elasticity.

• I. Journal #17 pt.A-Read “The Global Economy” p.130

-Answer questions (1-2) p.130

• II. Journal#17 pt.B-notes on the theory of production

• III. Journal#17 pt.C-questions on film about innovation

• IV. Math Practice with Economics

Theory of Production• The relationship between the factors of

production (land, labor, capital, entrepreneurs) and output of goods and services.

• Short run – change in the variable of labor

• Long run – change in land & capital

Law of Variable Proportions• Stage I – Increasing returns

*output rises at an increasingly faster rate (each new worker makes more than the previous worker did)

• Stage II – Diminishing returns

*output rises at a diminishing rate (each new worker increases output, but not as much as the previous worker did)

• Stage III – Negative returns

*output decreases as each new worker is added

Marginal Costs & Profits

Measure of Costs• Fixed cost – the cost that a business incurs even if

the plant is idle and production is zero

-salaries to executives

-interest on bonds

-rent payments

-taxes

-depreciation• Overhead – total fixed cost

• Variable costs – costs that change when output changes

-hourly workers

-power

-freight charges

-raw materials• Total costs – the sum of fixed and variable costs• Turn to page 133

From Poop to Profits• 1.) What is innovation? What does it have

to do with entrepreneurship?

• 2.) Why did Brad Morgan keep refining his products and processes?

• 3.) Why do entrepreneurs need freedom?

• 4.) What do the farmer and the bookstore owner have in common?

Economics 4/14/11http://mrmilewski.com

• OBJECTIVE: Working with supply.

• I. Administrative Stuff-attendance & follow ups

• II. Quiz#10

• III. Economics Lab-Supply & Demand

• IV. Mindjogger-video quiz on Chapter#5 Supply

• NOTICE: Chapter#5 Test Tomorrow!

Bell Schedule

• 1st Hour - 7:41 – 8:45

• 2nd Hour - 8:50 – 9:55

• 3rd Hour - 10:00 – 11:25

• 1st Lunch - 10:00 – 10:25

• 2nd Lunch - 10:30 – 10:55

• 3rd Lunch - 11:00 – 11:25

• Drill @ 11:30

Marginal Costs & Profits

Where will profits be maximized?

Directions

• 1.) Identify the factors of production in the film.

• 2.) Identify the public goods in the film.

Economics 4/15/11 mrmilewski.com

• OBJECTIVE: Demonstration of Chapter#5 and begin examination of price.

• I. Administrative Stuff-attendance & distribution of test

• II. Chapter#5 Test• III. Journal #18 pt.A

-Read “Business Week Newsclip” p.126

-Answer questions (1-2) p.126

• IV. Journal #18 pt.B-notes on prices

• V. Journal#18 pt.C Film: I Pencil

The Week After Spring Break• Monday 4/25/11 – No School

• Tuesday 4/26/11 – Journal#19

• Wednesday 4/27/11 – Journals#11-20 Due

• Thursday 4/28/11 – ½ Day Conferences

• Friday 4/29/11 – Prom Day

• Saturday 4/30/11 – Hebda Cup

Schedule• 1st Hour:                7:41   -   8:35 am• 2nd. Hour:              8:40   -   9:30 am• 4th. Hour:               9:35   -  10:25 am• 3rd. Hour:              10:30  -  11:55 am           

1st. Lunch:        10:30 - 10:55 am          2nd. Lunch:       11:00 - 11:25 am          3rd. Lunch:        11:30 - 11:55 am 

• 5th Hour:               12:00  -  12:50 pm• Assembly:               1:00  -   2:15pm 

How is price determined?• Price is determined

by the intersection of supply & demand.

Prices as Signals• Price – the monetary value of a product as

established by supply & demand.• Price is a signal that helps us make

economic decisions.• High prices are a signal for producers to

produce more and consumers to buy less.• Low prices are a signal for producers to

produce less and consumers to buy more.

Advantages of Prices• 1.) Prices in a competitive market favor

neither the producer nor the consumer.• 2.) Prices in a market economy are

flexible.• 3.) Prices have no administrative costs and

answer the questions WHAT, HOW, and for WHOM to produce.

• 4.) You have known it your entire life.

Life without prices?• Prices help allocate scarce resources, but

what if there was no such thing as price?• Rationing – the government determines

everyone’s “fair” share.• Problem with determining what is fair.• High administrative stuff (cost,

enforcement, etc)• No incentive to work hard.

I Pencil

http://school.discoveryeducation.com/clipart/images/box-o-pencils4c.gif

Questions on “I Pencil”• 1.) What does Milton Friedman mean by saying

there is nobody in the world who knows how to make a pencil?

• 2.) What kind of transaction makes a free market possible?

• 3.) What must be true for all parties in a voluntary transaction?

• 4.) What is the price system?• 5.) What is the zero-sum game philosophy?• 6.) What is meant by the invisible hand?