AP Macroeconomics - Unit 1: Supply

Supply

A producer's willingness and ability to sell a good or service

“Quantity Supplied” is determined by the ________ of an item sold.

Price

Law of Supply: Price

The price and the quantity supplied are directly related

Marginal Cost

It is more costly to produce a larger quantity than a smaller quantity

Causes of Supply Changes: "N” in NICEJAG

Natural or Manmade Phenomenon: natural disasters, riots, weather, etc.

Causes of Supply Changes: “I” in NICEJAG

Input Costs: prices of new materials or factors of production

Causes of Supply Changes: “C” in NICEJAG

Competition: the number of producers in the market (more competition correlates to more supply)

Causes of Supply Changes: “E” in NICEJAG

Expected Prices: if producers expect rising prices in the future then supply DECREASES now, and if producers expect lower prices in the future then supply INCREASES now

Causes of Supply Changes: “J” in NICEJAG

Joint Supply Profit: by-products and products that go together increase and decrease together

Causes of Supply Changes: “A” in NICEJAG

Alternative Goods Profit: opportunity cost will determine what is supplied more

Causes of Supply Changes: “G” in NICEJAG

Government Action: business taxes, regulations, and subsidies