Economics Notes

Determinates of Supply Continued:

TECHNOLOGY

         As the products get better, smaller more advanced. It changes the price and profit margin.

If we create an assembly line in our factory our supply would go UP.

For a short time supply will go down, just while they are implementing the new technology.

COMPETITION

Creates Supply, More producers

If too much supply

PRICES OF RELATED GOODS

(Affects Supply)

·       Complimentary: Goods go together Ex. Peanut Butter and Jelly

·       Substitute: Items in which you choice one item over another… Wendys over McDonalds

PRODUCER EXPECTATIONS

·       The hot item, the upcoming, new fashion, anticipated shortages (expected not to have enough)

·       A producer needs to be able to predict the future and know how much of something they will need.

THE TWO CATEGORIES THAT WILL AFFECT PRODUCTION DECISION (HOW MUCH YOU SUPPLY) ARE

1.    PRODUCTIVITY

2.    COST OF PRODUCTION

1. PRODUCTIVITY

        

TOTAL PRODUCT

                  MARGINAL PRODUCT

                  LAW OF DIMINISHING RETURNS

                  INCREASING MARGINAL RETURNS

                  DIMINISHING MARGINAL RETURNS

                  NEGATIVE MARGINAL RETURNS

2. COSTS OF PRODUCTION

FIXED COSTS

Costs that stay the same (costs never change)

Example: Mortgage, Rent, Cell Phone Bill, Car Note, Comcast, Insurance, Depreciation

                  VARIABLE COSTS

                  Costs that change

                  Example: MLGW, Utilities, Gas, Food