Ag Econ Chapter 3

What is individual supply

what you sell at each price

Individual supply curve

graph plotting the quantity of an item that a business plans to sell at each price

In supply which unit is usually the cheapest

the first unit

does ceteris paribus pertain to supply

yes when drawing the supply curve you hold all other things constant

Law of Supply

the tendency for quantity supplied to be higher when the price is higher

Which way does supply curve

supply goes up, supply to the sky

what is a perfectly competitive market

markets in which all firms sell an identical good and there are many buyers and sellers which are all relatively small compared to size of market.

Market power

ability to price things differently then the perfectly competitive market

Are most markets perfect markets

no most are not

How does marginal benefit and cost fit into supply

Keep selling until money you get is not worth the product, sell the item until you think the resources could be used for something better or more valuable

what does marginal costs include and exclude

includes variable costs but not fixed costs

what are variable cost

costs that vary with the quantity of output you produce

what are fixed costs

those costs that don’t vary when you change the quantity of output you produce

the rational rule for sellers in competitive markets

sell one more unit if the price is greater than or equal to the marginal cost

what happens to the supply curve if price is equal to marginal cost

supply curve is equal to marginal cost curve

what does supply summarizes

the price at which you are willing to sell each quantity

what explains why the supply curve is upward sloping

rising marginal costs

what will happen as you try to expand production

bottle necks that cause marginal costs to increase

marginal products

the increase in output that arises from an additional unit of an input

can diminishing product can occur in the long run because

despite being able to increase all inputs, extra inputs don’t always mean extra outputs like new workers aren’t experienced, new location is not as good

what do rising input costs also lead to

rising marginal costs

how do you know if something is above market power

if price is higher than marginal costs

how do we find market supply

add up individual supply

Market supply curve

a graph plotting the total quantity of an item supplied by the entire market at each price

What process can you use to estimate the full market supply curve

the same 4 step process to use when estimating market supply

why is the market supply curve upwards

made up of indivuidual supply curves which already go up, higher price=more profits means suppliers produce more units

what would produce a shift of the supply curve to the right

increase in supply

what would cause a shift of the supply curve to the left

decrease in supply

what are the 5 factors that shift the market supply curve

input prices: cost of production, productivity and tech., price of related outputs: price of competeters, expectations, type and number of sellers

if the cost of production goes up what happens to supply curve

it decreases

if new tech. comes out making inputs less what happens to supply

it increases

complements in production

goods that are made together to increase supply, leather and beef

substitutes in production

one product becomes more profitable so the old product’s supply goes down