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)