So I know you guys are excited to be here because 1, we're done with our demand shifts and supply shifts, but 2, I know you are really excited to see the rest of this page fill out. So here I've got your big daddy shift summary page where I've got listed all our demand shifts and all our supply shifts all in one place. This will be really helpful for you when you're first starting out in the demand and supply shifts, having everything in one place, but I think you will start to get a lot more comfortable and I'm hoping you won't even need this information by the time it comes to the exam. Cool, so let's go ahead and look at the right side. We went through the demand side earlier. Let's look at the supply side now. So with directly proportional, we were able to get a pretty cool acronym here just like we had for the demand. Here we've got N-E-S-T-S right, so our directly proportional ones make this NESTS acronym, so the first one being nature, so when there's a good event in nature, that's going to increase our supply, and remember all of these are vice versa. So I've listed only 1 because you don't really need them both there, but if there's a bad event in nature, the supply of the good would go down right, so just keep that in mind. And the next one here we've got the producer expectations of future price to hire new workers. So remember, this was the tricky one. This was the tricky one. This was the weird one that I wouldn't expect too often to come up, but they would have to be explicit about it if it were to come up on a test. So if they're going to be hiring new workers because of the expectations, then the supply of the good will increase. Next, we have subsidies. So when the subsidies for a product increase, we are going to see the supply of that good increase as well. Let's scroll down a little bit. We've got technology. So when technology increases and generally with technology, you're only gonna see it increasing. It would be pretty rare to see a decrease in technology. The supply is going to increase in that situation, and lastly, if the number of suppliers increases, we are also going to see an increase in supply. Cool. And now let's go down here to the inversely proportional ones and we also have a nice little acronym here, S-I-T-E. So first one being substitute in production, so when the price of a substitute in production, remember that's something else we could be producing instead of that product, when that price goes up, the supply of our good is gonna go down. Input prices. When the input price, the things that we need to make our product, labor and material, when the input prices go up, the supply of the good is gonna go down. When taxes increase, that's like an increased cost for the company, supply is going to go down, and lastly, the more common producer expectations is producer expecting future price to change and they're going to put stuff in storage. So if they're storing the current production that means that the supply of the good is going to decrease. Cool. Alright, and down here last but not least, we've got our change in price. So remember when we have a change in price, it's not gonna draw a new supply curve, right. We're only going to move along the supply curve. So here we have a graph with both a demand curve and a supply curve on it and assuming we had started at let's say this blue point in the middle and now we moved up to that red point, right, so that was just because of a change in price, we just moved along the supply curve, we don't draw an entirely new one. I put this in here because this does get tricky, this is where they love to steal points from you on the exam is dealing with these changes in price rather than shifting the curve. Alright, so let's go ahead and do some practice problems. Keep this sheet handy and if you don't need it, even better, but I would say that at first while we're first trying these out, definitely try and keep the sheet around. Cool? Alright, let's go ahead and do that.
Market Equilibrium - Online Tutor, Practice Problems & Exam Prep
Created using AIUnderstanding supply shifts is crucial in economics. Directly proportional factors, summarized by the acronym NESTS, include nature, producer expectations, subsidies, technology, and the number of suppliers. Conversely, inversely proportional factors, captured by SITE, involve substitutes in production, input prices, taxes, and producer expectations regarding future prices. Changes in price lead to movements along the supply curve rather than new curves. Mastering these concepts aids in grasping market equilibrium, elasticity of supply, and overall market dynamics, essential for analyzing economic scenarios effectively.
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Big Daddy Shift Summary
Video transcript
What happens in the market for corn if the government decides to subsidize farmers?
What happens in the market for corn if the price of wheat, a substitute in production, decreases?
What happens in the market for corn if producers expect a future price increase, and begin to put production into storage?
Here’s what students ask on this topic:
What factors cause a shift in the supply curve?
Several factors can cause a shift in the supply curve. Directly proportional factors, summarized by the acronym NESTS, include nature (e.g., good weather), producer expectations (e.g., expecting higher future prices), subsidies, technology advancements, and the number of suppliers. Conversely, inversely proportional factors, captured by SITE, involve substitutes in production (e.g., higher prices for alternative products), input prices (e.g., higher costs for raw materials), taxes, and producer expectations regarding future prices (e.g., storing current production). Understanding these factors is crucial for analyzing market dynamics and predicting changes in supply.
Created using AIHow do changes in price affect the supply curve?
Changes in price do not shift the supply curve; instead, they cause movements along the supply curve. For example, if the price of a good increases, the quantity supplied will increase, resulting in an upward movement along the supply curve. Conversely, if the price decreases, the quantity supplied will decrease, leading to a downward movement along the curve. This concept is essential for distinguishing between shifts in the supply curve and movements along it, which is a common point of confusion in exams.
Created using AIWhat is the difference between a shift in the supply curve and a movement along the supply curve?
A shift in the supply curve occurs when a non-price factor, such as technology or input prices, changes, causing the entire curve to move left or right. For instance, an improvement in technology would shift the supply curve to the right, indicating an increase in supply. In contrast, a movement along the supply curve happens due to a change in the price of the good itself. If the price increases, the quantity supplied increases, resulting in an upward movement along the curve. Understanding this distinction is crucial for analyzing market behavior accurately.
Created using AIHow do subsidies affect the supply curve?
Subsidies are financial aids provided by the government to producers, which lower their production costs. When subsidies increase, the supply curve shifts to the right, indicating an increase in supply. This is because producers can produce more at the same price or the same quantity at a lower price. Conversely, if subsidies decrease, the supply curve shifts to the left, indicating a decrease in supply. Understanding the impact of subsidies is essential for analyzing government policies and their effects on market equilibrium.
Created using AIWhat role do producer expectations play in shifting the supply curve?
Producer expectations about future prices can significantly impact the supply curve. If producers expect higher future prices, they may reduce current supply to store goods for future sale, shifting the supply curve to the left. Conversely, if they expect lower future prices, they may increase current supply to sell more before prices drop, shifting the supply curve to the right. This factor is crucial for understanding how future market conditions can influence current supply decisions and overall market equilibrium.
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