Transcript Supply Review

SUPPLY REVIEW
Economics
Mr. Bordelon
Key Terms

An expense that costs the same whether or not a
firm is producing a good or service.
Key Terms

An expense that costs the same whether or not a
firm is producing a good or service.
 Fixed
cost
Key Terms

The income that the supplier receives from selling
one more unit.
Key Terms

The income that the supplier receives from selling
one more unit.
 Marginal
revenue
Key Terms

A tax on the sale or manufacture of a good.
Key Terms

A tax on the sale or manufacture of a good.
 Excise
tax
Key Terms

A measure of how suppliers will respond to a
change in price.
Key Terms

A measure of how suppliers will respond to a
change in price.
 Elasticity
of supply
Key Terms

A government payment to support a business or
market.
Key Terms

A government payment to support a business or
market.
 Subsidy
Key Terms

The tendency of suppliers to offer more of a good
at a higher price.
Key Terms

The tendency of suppliers to offer more of a good
at a higher price.
 Law
of supply
Key Terms

The additional cost of producing one more unit of
output.
Key Terms

The additional cost of producing one more unit of
output.
 Marginal
cost
Key Terms



Supply schedule
Regulation
Variable costs
Main Ideas

How does the marginal product of labor change as
more people are hired?
Main Ideas

How does the marginal product of labor change as
more people are hired?
 Marginal
product of labor increases up to a certain
point. Once that point is reached, however, total output
still increases, but at a decreasing rate. Diminishing
returns.
Main Idea

What categories of costs combine to create a firm’s
total cost?
Main Idea

What categories of costs combine to create a firm’s
total cost?
 Fixed
costs and variable costs combine to create total
cost. Fixed costs are costs that are the same no matter
how much is produced. Variable costs rise or fall
depending on the quantity produced.
Main Ideas

Name and describe three factors that can cause a
change in supply.
Main Ideas

Name and describe three factors that can cause a
change in supply.
 Changes
in input costs
 Future expectations
 Technological changes
 Government subsidies, taxes, and regulations
 Imports and exports
Main Idea

What circumstances cause a firm to experience
diminishing marginal returns?
Main Idea

What circumstances cause a firm to experience
diminishing marginal returns?
 Diminishing
marginal returns occur when output declines
with each additional unit of labor. They generally
result when the supply of capital does not increase with
the work force, such as when there are not enough
machines or tools or supplies for added workers to use.
Main Ideas

How can the global economy affect the supply of a
good in the United States?
Main Ideas

How can the global economy affect the supply of a
good in the United States?
 Increases
in wages, technological innovation, or trade
restrictions will affect supply of goods to the United
States.
Main Ideas

To maximize costs, marginal revenue should be
equal to ______.
Main Ideas

To maximize costs, marginal revenue should be
equal to marginal cost.
Critical Thinking

Assume that a $1 per pound tax has been placed
on fish. What effect will this have on the supply
curve for fish?
Critical Thinking

Assume that a $1 per pound tax has been placed
on fish. What effect will this have on the supply
curve for fish?
 Supply
curve will move to the left.
Critical Thinking

The local coffee shop on 17-92 has the following
expenses per month:
$5,000 rent
 $3,000 manager
 $4,000 part-time workers
 $2,000 supplies



In July, the owner can expect to earn $7,000. If the
store closes down, he won’t have to pay for part-time
workers or supplies.
Should he close the shop down?
Critical Thinking

Should he close the shop down?
 No.
Total revenue ($7,000) is greater than the cost of
keeping the shop open ($6,000).
Compare

What is the difference between increasing marginal
returns and diminishing marginal returns?
Compare

What is the difference between increasing marginal
returns and diminishing marginal returns?
 Increasing
marginal returns occur when there is an
investment in the business, and the marginal product of
labor increases as the number of workers increases.
 Diminishing marginal returns occur when there is an
investment in the business, and the marginal product of
labor decreases as the number of workers increases.
Problem Solving

You open a t-shirt factory.
 What
are your fixed costs?
 What are your variable costs?
 How would each of these costs affect the number of tshirts you make?