When the price of one or more of these inputs rises, producing ice cream is less profitable, and firms supply less icecream. If input prices rise substantially, a firm might shut down and supply no ice cream at all. Thus, the supply of a good is negatively related to the price of the inputs usee! to make the good-

Technology The technology for turning inputs into ice cream is another determinant of supply. The invention of the mechanized ice-cream machine, for example, reduced the amount of labor necessary to make ice aeam. By reducing firms' costs, the advance in technology raised the supply of ice cream.

Expectations The amount of icecream a firm supplies today may depend on its expectations about the future. For example, if a firm expects the price of ice cream to rise in the future, it will put some of its current production into storage and supply less lo the market today.

Number of Sollors In addition to the preceding factors, which influence the behavior of individual sellers, market supply depends on the number of these sellers. If Ben or Jerry were to retire from tl>e ice-cream business, the supply in the market would fall.

Summary The supply curve shows what happens lo the quantity supplied of a g<x>d when its price varies, holding constant all the other variables that influence sellers. When one of these other variables changes, the supply curve shifts. Table 2 lists the variables that influence how much producers choose to sell of a good.

Once again, lo remember whether you need lo shift or move along the supply curve, keep in mind that a curve shifts only when there is a change in a relevant variable that is not named on either axis- The price is on the vertical axis, so a change in price represents a movement along the supply curve. By contrast, because input prices, technology, expectations, and the number of sellers are not measured on either axis, a change in one of these variables shifts the supply curve-

QUICK QUIZ Make up an example of a monthly supply schedule for pljza and 9'aph the implied supply curve. • Give an example of something that would shift this supply curve, and briefly explain your reasoning, a Would a change in the price of pizza shift this supply curvo?

Was this article helpful?

0 0
Single Parenting

Single Parenting

Finally! You Can Put All Your Worries To Rest! You Can Now Instantly Learn Some Little-Known But Highly Effective Tips For Successful Single Parenting! Understand Your Role As A Single Motherfather, And Learn How To Give Your Child The Love Of Both Parents Single Handedly.

Get My Free Ebook

Post a comment