1.113 Supply Sellers and Their Choices We know that as consumers, our behavior can affect the price of a good or service. Sellers also make choices that affect the supply of a good or service. In this lessen, we will explore how a seller's decision can aect the overall price of a product. Let's start with an example of how this might work. Have you ever streamed your favorite T'J show on your smart T'J, computer or mobile device? 'Why might companies like Netix and Hulu be thrilled about skyrocketing demand for video streaming? As a subscriber, would you be happy about an increase in price to stream your favorite shows? 'Nhen demand skyrockets, we know that price goes up. In this lesson, you will focus on how changes in price affect the behavior of sellersthe producers of e conomic pro duct s. You will discover how supply informs our choices as consumers and why studying supply is userl. Remember to take notes. You will use this learning to create your own supply graph reecting changes to the supply curve. The Dell Monitor! Imagine that Dell invented a new gaming monitor and the company wants to analyze the supply choices for their product. They will need to create a supply schedule for the monitor and utilize the information to plot a supply curve on a graph. Supply [S] is the "whole curve," meaning the supply for goods and services at all prices. Quantity supplied [QS] is a "specic point" on the curve, showing how much will be produced at a "specic price." Supply for The Dell Monitor Supply Schedule Companies want to make money. They will look at how much they can charge for a product 1n relation to how much they can supply to make a _p.rot Notice what ha pens to the quantity supplied as the pr1ce goes down. This chart 1s called a supply sche ule. Price Quantity Supplied $2DD EDD $151] 15D $111) 111) $51] 5D Supply Curve Shi Remember that a change in price will only change quantity supplied [a specic point on the curve}, not the whole supply curve. Imagine that Nintendo purchases new machines that speed up manufacture of the consoles. An increase in supply would result in the curve shiing to the right. We label the new curve S1. What would happen if the cost of plastic quadrupled? Since plastic would be a major component of the console, supply would likely decrease at every price level, and so a graph of the supply curve would completely shi to the le. We label the new curve S2. Please click to enlarge the graph to the le to view these shifts in supply. A curve shift to the left indicates a decreasein supply. A curve shift to the right indicates an increasein supply. For both supply and demand curve shifts, we can say: Left is less. Right is more. ROTTEN W'hat events would cause the whole supply curve to shi? The acronym ROTTEN can help you remember six dierent factors that can cause a shift in supply. Notice that a shift can mean either an increase or a decrease in supply. R Resource: cost and availability Example: A major teclmology plant is destroyed and computer chips for gaming are unavailable for Nintendo to use in production. Nintendo's supply decreasesthe curve shifts to the le. D Other goods Example: The price of video monitors decreases. People are buying more monitors and may be tempted to get a new Nintendo game system as well. Nintendo'sI supply increasesthe curve shifts to the right. T Taxes, subsidies, and govermnent regulation Example: The govermnent doubles taxes on all parts used to manufacture Nintendo consoles in the United States. This causes Nintendo'sI manufacturing costs to increase and lowers protability. Nintendo'sI supply decreasesthe curve shis to the left. T Technology (productivity) Example: A new machine is developed that assembles the consolesin half the time causing Nintendo's costs to decrease. Nintendo's supply increasesthe curve shifts to the right. E Expectations of the producer Example: Nintendo(@ expects to have higher demand for its new console over the holiday season. Nintendo's @ supply increases-the curve shifts to the right. N Number of firms in the industry Example: Three other video game manufacturers go out of business causing less competition for Nintendo@. The market supply decreases due to fewer businesses in the industry-the curve shifts to the left. Lesson Summary When plotting points from a supply schedule, remember that price goes along the y-axis and quantity is on the x-axis. The graph of a supply curve slopes upward because as price increases, quantity supplied increases. Supply is represented by the whole curve. A specific point on the curve represents quantity supplied. The acronym ROTTEN will help you remember the reasons the whole supply curve may shift, resulting in a change in quantity supplied at all price levels. Assignment: Use the data chart to plot your supply curve: Price (in whole dollars) Quantity 10 900 15 1800 20 3150 25 4500 30 5850 35 8100 40 10800 45 13500 50 15200 Create a Graph Now that you are familiar with the way a supply curve is graphed, you will create your own graph to submit to your instructor. Step 1: Use the data above for your supply curve. Step 2: Create a supply graph. Correctly label the x-axis and y-axis with the terms price and quantity.Assign values for price and quantity along each axis. Consider the numbers in your data table and the size of your graph. For example, you may want to make price in increments of 25. Create a title for your graph by choosing a good or service for the data to represent. Using the data table 'om Step 1, plot a supply curve and label the curve \"S.\" Step 3: Add a curve to your graph that represents an increase in supply. Label the new curve \"S 1 Step 4: [n a few sentences, explain a situation that could have resulted in the supply increase. Be sure to: Make your situation specic to the product or service you chose in Step 2. Use at least one factor from the acronym ROTTEN in your explanation. Step 5: Add another curve to your gaph that represents a decrease in supply. Label the new curve \"SE.\" Step 6: [n a few sentences, explain a situation that could have resulted in the supply decrease. Be sure to: Make your situation specic to the product or service you chose in Step 2. Use at least one factor from the acronym ROTTEN in your explanation. Suggestions for Creating and Submitting Graphs There are many tools you may use to create and submit your graph. Here are a few options for you to consider. Once you have saved your graph image to your hard drive, you can copy it into the same word processing dllllt that contains the rest of your assignment or attach it as a separate le. If you have questions, please contact your instructor for additional guidance. Tools to Create and Submit Graphs Tool How to Save Image for Submission Graphing calculator [one that has the capability to transfer images} Transfer the image le to your computer, then save the image as a le on your hard drive. Graph or plain paper_ [sketch by hand} Take a closeup digital photo or scan your graph, then save the' image as a le on your hard dlive