9/21/2019

LEARNING OBJECTIVES SUPPLY

• Define and explain the difference between
supply and quantity supplied. Supply is a fundamental economic
• Define and explain the law of supply. concept that describes the total
amount of a specific good or service

SUPPLY •

•
List and explain things that cause a supply
curve to shift to the left/right.
Learn the determinants of Supply.
that is available to consumers.
-Investopedia

Paul Joshua O. Cual

Table 3: SUPPLY SCHEDULE OF TSHIRTS

FOR THE MONTH OF NOVEMBER 2018 Supply Curve
PRICE
PRICE QUANTITY SUPPLIED 180
LAW OF SUPPLY (P) (QS) 160
140
- The relationship between price and 120

quantity in supply is directly 100 165 100

proportional. 75 125
80
60
- As price increases, quantity 40
supplied increases while as price 50 75 20

decreases, QS decreases. 25 25
0
25 50 75 100

QUANTITY SUPPLIED

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Linear Supply curve Linear Supply curve

Example of linear supply curve
A linear supply curve can be plotted using a simple Example of linear supply curve How does a supply curves move?
equation P = 30+ 0.5(QS)
A supply curve shifts whenever a
P = a + bS factor that affects the supply of the
good (other than price) changes
a = plots the starting point of the supply curve on the Y- RIGHT: Increase in supply (at all
axis intercept. prices)
b = slope of the supply curve. LEFT: Decrease in supply (at all
prices)
P = 30+0.5(Qs)

Shift in slope of supply curve Shift in a – Shift in the supply curve

P = 30+ 1.2(QS) P = 0 + 1.2 (Qs) shifts the supply curve downwards so
it starts at the 0,0 NOTES IN LAW OF SUPPLY
 The movement of the entire supply
curve brought about by change in its
determinants.
 A movement along the supply curve
brought about by the change in price.
 A downward supply curve is called a
decrease in QS; an upward supply
curve is called an increase in the QS.

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DETERMINANTS OF SUPPLY PRODUCTIVITY

• “P.I.G. T.O.E.S” – P roductivity (workers, machines, and/or assembly)

SCENARIO #1
– P roductivity Our Xbox factory finds out that our
– I nputs workers are getting a 25% pay raise
– G overnment Actions (increase in the cost of labor)…
– T echnology
– O utputs
– E xpectations
What happens to the supply curve?
– S ize of Industry

Supply Curve for Xbox 360 INPUTS GOVERNMENT ACTIONS

S – I nputs (Change in the price of materials needed to make – G overnment Actions (Subsidies and Taxes)
$500 S the good)
450
Price per Xbox

400

350 Increase in labor pay =

more production costs
300
= decrease in the # of
250 S Xboxs

200
S

0 30 40 50 60 70 80 90
Quantity Supplied
in Billions of Xboxes per Year

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Effect of tax on supply curve Effect of Subsidy on supply curve TECHNOLOGY

P = 0 +2Q Suppose we have supply curve – T echnology (Improvements in machines and production)

A specific tax will shift supply curve upwards by Php5.

After tax. The supply curve will be P = 30+0.5Q

P = 5+2Q After subsidy of Php10

An Indirect tax will shift supply curve upwards by a P = 20+0.5Q

certain percentage. e.g. VAT = 20%

P = 0+2Q. After VAT will be P = 0+(2Q * 1.2)

Supply Curve for Xbox 360 OUTPUTS

– O utputs (Price changes in other products)
SCENARIO #2 $500
Increase technology =
more Xboxs produced
S

450 S
= increase in the # of
Our Xbox factory invents a
Price per Xbox

400 Xboxs

technology that produces twice as 350

many Xboxs in a day as before. 300

250

200
What happens to the supply curve? S S

0 30 40 50 60 70 80 90
Quantity Supplied
in Billions of Xboxes per Year

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EXPECTATIONS
– E xpectations (outlook of the future)
DISCUSSION
• The Balutakay Coffee Farmers Association (BACOFA)
indicated that “With more coffee shops starting operations,
the demand for high-quality specialty coffees had also
increased although the current supply may not be able yet to
fully support the demand”
• BACOFA was able to produce 28, 000kg of specialty coffee
for the past years. Their coffees are being derived to coffee
shops in Manila, Iloilo, Bacolod, and Davao City. These are
also already exported to Japan.
SIZE OF INDUSTRY
– S ize of Industry (Number of companies in the industry)
REALIZATION
• According to BACOFA “We realized that the demand is really
not a problem as long as we make sure that we are
producing quality and deliver well-selected beans to our
clients. There is the market, we just lack the good supply.
Sometime we cannot already cater to all the demands
because we do not have enough supply”
• "In order to really have good-quality coffee beans, we
observe religious application of fertilizer, spraying, and
pruning. Roughly, we spend about P12, 000 to P15, 000
maintaining the trees per week. This excludes the fertilizer
and other stuff needed"
9/21/2019
ARTICLE REVIEW
“Coffee demand high but supply is low”
Published and Updated : April 1, 2019
Published by : SunStar Philippines
SOLUTION TO THE PROBLEM
• In a bid to help out with the problem, NGOs such as
Acdi/Voca had been training coffee farmers to produce and
process better coffees. Currently, Bacofa cooperative has 78
members but Dubria said they are expecting 150 more who
had completed the training conducted by Acdi/Voca.
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THANK YOU!!!

Any Questions?