ECO-4 Lecture Notes - Lecture 8: Cowhide, Energy Gel

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11 Sep 2020

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Change in supply: when any factor influences selling plans then the price of the good changes. Six factors that brings changes in supply: prices of the factors of production, prices of related goods produced, expected future prices, the number of suppliers, technology, the state of nature. If price of a factor of production used to produce a good rises minimum price that a supplier is willing to accept for producing each quantity of that good supply. Rise in the price of a factor of production decreases demand (e. g. rise in minimum wage, decreases supply in hamburger) A substitute in production for a good is that can be produced using the same resources. The supply of a good increases if the price of a substitute in production falls because they will produce more of the substitute instead. (i. e price of energy gel rises, supply of energy bar falls) Goods are complements in production if they can be produced together.

Related Questions

a. State the law of supply.

	Quantity supplied rises as price increases, other things are constant. Quantity supplied falls as price decreases, other things are constant.
	Supply increases as price falls. Supply decreases as price rises.
	Supply increases as price increases. Supply decreases as price decreases.
	Quantity supplied rises as price falls, other things constant. Quantity supplied falls as price increases, other things are constant.

b. Why is price directly related to quantity supplied?

	As price rises, consumers substitute other goods whose price has not risen.
	As price rises, suppliers rearrange their activities to supply more of that good to take advantage of the higher price.
	As price falls, suppliers rearrange their activities to supply more of that good to take advantage of the lower price.
	As price rises, suppliers rearrange their activities to supply more of a substitute good to take advantage of the higher price.

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Other things remaining the same, what would happen to the supply of a particular commodity if the following changes occur?

The price of the commodity increases.

Government regulators outlaw the use of a technology that enables the good to be

produced at a significantly lower cost.

The prices of inputs used to produce the commodity decrease.

The price of a commodity that is a substitute in production increases.

Managers expect the price of the good to fall in the near future.

As the cost of capital rises, firms in the industry stop purchasing plant and equip-

ment, which allows depreciation to diminish the productive capacity in the indus- try.

What happens to demand when the following changes occur?

The price of the commodity rises.

Income decreases and the commodity is normal.

Income decreases and the commodity is inferior.

The price of a complement good increases.

The price of a substitute good decreases.

Identify four shift factors of supply with the correct explanation of how each affects supply.

Instructions: To receive full credit, you must make a selection for each option. For the correct answer(s), click the box once to place a checkmark. For the incorrect answer(s), click twice to empty the box.

	Producers expect prices of their products to change in the future. As the price that producers expect to sell their products for increases, supply decreases.
	Income declines. As income rises, supply increases.
	Reduction in taxes paid by consumers. As taxes rise, supply falls.
	The price of inputs changes. As the price of inputs rises, supply decreases.
	When new production technologies have introduced the cost of production falls and supply increases.
	Change in taxes paid by producers. As the amount of taxes that producers pay increases, supply decreases.
	Change in consumer tastes. As the taste for a product rises, supply increases.

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ECO-4 Lecture Notes - Lecture 8: Cowhide, Energy Gel

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