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Ch. 5
Chapter 5: Supply
Chapter Overviews
Section 1: What Is Supply?
Supply, like demand, is another important microeconomic concept. Together, supply and demand explain how prices are determined and how markets function. Supply is defined as the quantities of output that producers will bring to market at each and every price. Like demand, supply can be presented in the form of a supply schedule, or graphically as a supply curve. Individual producers have their own supply curves, and the market supply curve is the sum of individual supply curves. The Law of Supply states that more output will be offered for sale at higher prices and less at lower prices. A change in quantity supplied is represented by a movement along the supply curve, whereas a change in supply is represented by a shift of the supply curve to the left or right. Changes in supply are caused by changes in the cost of inputs, productivity, technology, taxes, subsidies, expectations, government regulations, and the number of sellers in the market. Supply elasticity describes how producers will change the quantity they supply in response to a change in price.
Law of Supply
In-class assignment: in your own words, define demand. What is the Law of supply? How does demand relate to supply? Graph out a sample Law of supply.
Supply curve video
In-class assignment: define supply curve. In your own words, describe a supply curve.
Draw a supply curve graph by following the video.
Use the market for cars as your example.
Who needs to be willing and able?
What do suppliers want?
What do consumers want?
What happens when cars are more expensive?
What happens when there is a change in price?
What happens to demand?
market supply curve
In-class assignment: in your own words, define market supply (long run supply curve).
Long Run Supply Curve
quantity supplied
change in quantity supplied
change in supply
Changes in Supply
In-class assignment, working with a partner, answer the following questions:
What do we mean by changes in supply?
Why do changes in supply occur?
What happens when supply decreases?
How do market forces effect supply after supply decreases?
What happens when supply increases?
How do market forces effect supply after supply increases?
What determines supply?
Philly News: "Teacher salaries issue sharpens across region; "You almost have class warfare here," said the president of the school board.
Hans Rosling's 200 Countries, 200 Years, 4 Minutes - The Joy of Stats - BBC Four
In-class assignment: working with a partner, answer the questions below.
Student Web Activity
"Finding Company Profiles"
Introduction
When economists think of supply, they often think about businesses, the products they produce, and the costs of producing them. Business organizations are often willing to share information about their products with consumers in hopes of making a sale, and this information is often on the World Wide Web.
Destination Title: Kentucky Fried Chicken
Cf. http://www.kfc.com/
Directions
Start at the Kentucky Fried Chicken home page.
* Click on "About Us" and browse through the information about the company.
* Select the "History" link from the menu on the left.
* Click on the additional topics at left of your screen to learn more (Colonel Sanders, Secret Recipe, Pressure Cooker, and Press Releases).
1. Describe Kentucky Fried Chicken's business niche. What type of business organization is it?
2. How did Colonel Sanders start KFC, and why?
3. What product, facility, retail sales, and employee information is provided?
4. Select the "Animal Welfare" page on the left of your computer screen. What has KFC done to ensure animal welfare?
Cf. http://glencoe.mcgraw-hill.com/sites/0078747643/student_view0/unit2/chapter5/student_web_activities.html
1. Describe Kentucky Fried Chicken's business niche. What type of business organization is it?
KFC Corporation, based in Louisville, Kentucky, is the world's most popular chicken restaurant chain, specializing in Original Recipe®, Extra Crispy®, Kentucky Grilled Chicken™ and Original Recipe Strips with home-style sides, Honey BBQ Wings, and freshly made chicken sandwiches.
Every day, more than 12 million customers are served at KFC restaurants in 109 countries and territories around the world. KFC operates more than 5,200 restaurants in the United States and more than 15,000 units around the world. KFC is world famous for its Original Recipe® fried chicken -- made with the same secret blend of 11 herbs and spices Colonel Harland Sanders perfected more than a half-century ago. Customers around the globe also enjoy more than 300 other products -- from Kentucky Grilled Chicken in the United States to a salmon sandwich in Japan.
KFC is part of Yum! Brands, Inc., the world's largest restaurant company in terms of system restaurants, with more than 36,000 locations around the world. The company is ranked #239 on the Fortune 500 List, with revenues in excess of $11 billion in 2008.
2. How did Colonel Sanders start KFC, and why?
ANSWER
1930
In the midst of the depression, Harland Sanders opens his first restaurant in the small front room of a gas station in Corbin, Kentucky. Sanders serves as station operator, chief cook and cashier and names the dining area "Sanders Court & Café."
3. What product, facility, retail sales, and employee information is provided?
ANSWER
MENU: http://www.kfc.com/menu/
Facility, store locations can be searched; a SHOP page is available, sales info is available in the "About Us" section; "Careers" describes the work at KFC.
4. Select the "Animal Welfare" page on the left of your computer screen. What has KFC done to ensure animal welfare?
ANSWER
We are monitoring our suppliers on an ongoing basis to determine whether our suppliers are using humane procedures for caring for and handling animals they supply to us. KFC formed the Animal Welfare Advisory Council, which consists of highly regarded experts in the field. We were also a prominent player in the joint effort conducted by the National Council of Chain Restaurants and the Food Marketing Institute to develop comprehensive guidelines for all species of farm animals. KFC has implemented a farm level audit program - a program which is industry-leading in the areas of poultry care and handling.
http://www.kfc.com/about/animalwelfare.asp
Why is Animal Welfare an issue for the Colonel?
Animal slaughter for KFC is halal (done in accordance to Islamic law) compliant in some areas. Non-Muslims have objected to the allegedly cruel nature of Islamic animal treatment as well as groups such as PETA (People for the Ethical Treatment of Animals) have raised concerns about Islamic practices.
The Halal Food Authority in England endorses KFC animal slaughtering.
Cf. http://www.halalfoodauthority.co.uk/press-kfc.html
The imposition of halal includes many British supermarkets, fast-food chains, hospitals, schools, pubs and sporting arenas such as Wembley Stadium, serving halal meat and poultry without notifying the public; the American Muslim Consumer Conference started to follow suit in the U.S. (as of Dec. 2010) and attracted 400 attendees.
Cf. http://news.yahoo.com/s/ap/20101227/ap_on_bi_ge/us_the_muslim_consumer
subsidy
Subsidies, 2:50
Description of how subsidies operate in a competitive market and the effects on consumer surplus, producer surplus and social surplus using supply and demand diagrams.
In-class assignment: with a partner, answer the following questions.
What happens with subsidies?
Which direction does the demand curve go?
Which direction does the supply curve go?
Who or what supplies the subsidies?
What is the reason behind subsidies?
What happens to costs?
What direction does the supply curve shift as a result?
Where does the money for subsidies come from?
supply elasticity
Gas Prices, Gas Gouging, Peak Oil, Elasticity, Supply Demand, 1:31
Academic Vocabulary
various
interaction
Companies in the News
Flu Shot Gold Rush
An Introduction to Supply, p. 118
Main Idea
The Supply Schedule
The Individual Supply Curve
The Market Supply Curve
Figure 5.2 Individual and Market Supply Curves
Cf. http://glencoe.com/sites/common_assets/socialstudies/in_motion_08/epp/EPP_p119.swf
A Change in Quantity Demanded
Review video
Change in Demand vs Change in Quantity Demanded, 5:13
In-class assignment: you may work with a partner to answer.
What happens to demand if prices go up?
What formulas express the concepts covered here?
Is there anything that could alter the underlying demand?
What about changes in related markets?
What happens when apartment rents increase?
In which direction does the demand curve shift?
What happens as a result of changes in income?
What about expectations?
What about the prices of complementary goods?
What is the difference in the change in demand vs. the change in quantity demanded?
Reading Check
Synthesizing
How might a producer of bicycles adjust supply when prices decrease? p. 120
Change in Supply, p. 120
The Determinants of Supply, 9:12
This video describes the different determinants of supply- price, input prices, technology, expectations and number of sellers.. It also introduces the supply curve and discusses its various features.
In-class assignment: with a partner, answer the following questions.
What are the five determinants of supply?
Define quantity supplied.
What is probably the most important determinant of supply?
Define the law of supply.
According to this video, draw the sample supply curve provided.
In which direction does the supply curve move?
What two features are illustrated in the supply curve equation?
Does supply indicate marginal cost?
What is the second determinant of supply?
The third determinant?
Explain what technology means in economics and how it is a determinant.
How do expectations play a role?
What is the last determinant?
Explain how the number of sellers effect supply.
Economics and You
Cost of Resources
Productivity
Technology
Taxes and Subsidies
Expectations
Did You Know?
Government Regulations
Number of Sellers
Reading Check, Explaining, p. 123
Why do factors that cause a change in individual supply also affect the market supply curve?
Careers, Retail Salesperson
Elasticity of Supply, p. 124
Main Idea
Economics and You
Three Elasticities
Determinants of Supply Elasticity
Reading Check, Comparing, p. 125
How are the elasticities of supply and demand similar? How do they differ?
Case Study, "Green" Suppliers, p. 126 (ethanol, flexible-fuel vehicle (FFV)
Preview
Section 2 The Theory of Production, p. 127
The theory of production deals with the way output changes in the short run when a single productive input is varied. This relationship is presented graphically in the form of a production function. The two most important measures of output are total product and marginal product. Three stages of production—increasing returns, diminishing returns, and negative returns—show how marginal product changes as additional variable inputs are added.
Chapter 5, Section 2 - Reading Strategy
In-class assignment (you may work with a partner for the exercise):
Directions: Listing
As you read about production, complete the graphic organizer by listing what occurs during the three stages of production.
Cf. http://glencoe.com/sites/common_assets/socialstudies/in_motion_08/epp/EPP_p128.swf
Chapter 5, Section 2 - Review
In-class assignment (you may work with a partner):
Directions: Explaining
Complete the graphic organizer by explaining how marginal product changes in each of the three stages of production.
Cost and revenue are added to the theory of production. Several important measures of cost are introduced, including fixed cost, variable cost, total cost, and marginal cost. Total revenue and marginal revenue are the most important measures of revenue. The firm reaches the break-even point when the revenue from sales is large enough to cover the total cost of production. Furthermore, the firm finds its profit-maximizing quantity of output where the marginal cost of production is exactly equal to marginal revenue from the sale of the product.
Chapter 3 Prep
Chapter 3: Business Organizations
Cf. http://glencoe.mcgraw-hill.com/sites/007879997x/student_view0/unit1/chapter3/self-check_quizzes.html
Crossword Puzzle
Cf. http://www.glencoe.com/olc_games/game_engine/content/gln_ss/epp_08/ch03/index.html
Vocabulary eFlashcards
Cf. http://www.glencoe.com/qe/efcsec.php?qi=21820
Ch. 4 Prep
Ch. 5 Prep
Chapter 5 Supply Multiple Choice Quiz
Cf. http://glencoe.mcgraw-hill.com/sites/0078747643/student_view0/unit2/chapter5/self-check_quizzes.html
Chapter 5 Puzzle
Cf. http://www.glencoe.com/olc_games/game_engine/content/gln_ss/epp_08/ch05/index.html
Chapter 5 Supply Flashcards
Cf. http://www.glencoe.com/qe/efcsec.php?qi=15424
Resources
Elasticity and Supply, 3:52 (Warning: images of alcohol consumption, language, and possible objectionable content, this is not required viewing).
Elasticity Song, 3:34
A song about price, income and cross elasticities of demand and price elasticity of supply. Note: Rojak is a mixed salad found in South east Asia (figurative meaning: melting pot). Teh and kopi mean tea and coffee.
Supply and Demand Nights AP Econ Music Video, 4:11
Email (or hand in hard copy) to gmsmith@shanahan.org.
Monday HW
1. p. 113, #26-28.
Tuesday HW
1. p. 113, #29-30.
Wednesday HW
1. p. 113, #31-32.
Thursday HW
1. p. 115, #1-3.
Friday HW
1. p. 116, #1-2.
