Chapter+5+HW

Chapter 5.1 Notes Key Terms Supply: the amount of goods available Law of Supply: tendency of suppliers to offer more of a good at a higher price Quantity Supplied: the amount a supplier is willing and able to supply at a certain price Supply Schedule: a chart that lists how much of a good a supplier will offer at different prices Variable: a factor that can change Market Supply Schedule: a chart that lists how much of a good al suppliers will offer at different prices Supply Curve: a graph of the quantity supplied of a good at different prices Market Supply Curve: a graph of the quantity supplied of a good by supplied of a good by all suppliers at different prices Elasticity of Supply: a measure of the way quantity supplied reacts to a change in price

The Law of Supply - as a price of a good rises, firms will produce more in order to earn revenue - if the price of a good falls, firms will produce less or drop out of the market

Higher Production -if a firm is earning a profit by selling a good and they increase the price, the firm's profit increases - promise of higer revenues for each sale encourages the firm to produce more - search for profit drives the supplier's decision

Market Entry - profit appeals to both producers in the market and people who decide to join the market

The Supply Schedule - a supply schedule shows the relationship between price and quantity supplied for a specific good - the table contains two variables (factors that can change) - lists supply for a very specific set of conditions

A Change in the Quantity Supplied - supply is used to refer to the relationship between price and quantity supplied - rise or fall in prices will cause the quantity supplied to change, but not the supply schedule

Market Supply Schedule - all supply schedules of individual firms in a market can be added up to create a market supply shcedule (shows the relationship between prices and the total quantity supplied by all of the firms in a particular market) - info from a market supply schedule becomes important when needed to determine the total supply of products at a certain price in a large area

The Supply Graph - created when data points in the supply schedule are graphed - similar to a demand curve except the horizontal axis measures the quantity of the good supplied not the quantity demanded - always rises from left to right

Supply and Elasticity - elasticity of supply is a measure of the way suppliers respond to changes in the price of good

Elasticity of Supply and Time - in short runs, firms can't easily change its output level = inelastic supply - in long runs, firms are more flexible = elastic supply

Elasticity of Supply in the Short Run - in a short run supply is inelastic whether the price increases or decreases - if prices rise places can hire workers quickly

Elasticity in the Long Run - supply can become more elastic over time

Chapter 5.1 Assessment 1. Explain the law of supply in your own words. - when suppliers sell more of a product for a higher price 2. What is the difference between supply and quantity? - the supply is the amount of goods available and the quantity is the amount a supplier will be able to supply at a certain price 3. How does the quantity supplied of a good with a large elasticity of supply react to a price? - supply is very sensitive to change 4. If the price of oil rises around the world, what will happen to oil production in Texas? Explain your answer - the oil production in Texas would increase because it has to meet with the prices 5. Explain whether you think the supply of the following goods is elastic or inelastic, and why. (a) hotel rooms - elastic, because people travel throughout the year but sometime during certain seasons there might be more people traveling to specific place (b) taxi rides - elastic, because some people might buy cars when others need them all the time (c) photographs - inelastic because, a lot of people will always want to save photographs

Chapter 5.2 Notes Key Terms Marginal Product of Labor: the change in output from hiring one additional unit of labor Increasing Marginal Returns: a level of production in which the marginal product of labor increases as the number of workers increases Diminishing Marginal Returns: a level of production in which the marginal product of labor decreases as the number of workers increases Fixed Cost: a cost that does not change, no matter how much of a good is produced Variable Cost: a cost that rises or falls depending on how much is produced Total Cost: fixed costs plus variable costs Marginal Cost: the cost of producing one more unit of a good Marginal Revenue: the additional income from selling one more unit of a good; sometimes equal to price Operating Cost: the cost of operating a facility, such as a store or factory

Labor and Output - businesses ask how many workers they need to higher depending on their productivity

Marginal Product of Labor - change in output from hiring one more worker - measures the change in output at the margin, where the last worker has been hired or fired

Increases Marginal Returns - increasing workers increases performing tasks - labor increases level of production

Diminishing Marginal Returns - level of production in which labor decreases as the number of workers increases - each worker adds to total output

Negative Marginal Returns - workers get in each others way and overall output decreases

Production Costs - paying workers and purchasing capital

Fixed Costs - costs that don't change - production facility, building, factory, office, workers salaries

Variable Costs - costs that rise/fall depending on the wuantity produces - raw materials, workers working less hours a week, electricity

Total Cost - fixed and variable costs=total

Marginal Cost - cost of producing one more unit of good

Setting Output - profit is defined as total revenue minus total cost - total revenue is the money the firm gets by selling its products

Marginal Revenue and Marginal Cost - find the best level of output is to find the output level where marginal revenue