Non Price Factors that Shift Supply Curves Spring 2025

Summary

This screencast explains the supply side of the economic model, focusing on how the supply curve is influenced by various factors. It explores the law of supply, showing how price affects the quantity supplied, and introduces non-price factors—productivity, input costs, number of resources, producers, government action, and expectations of future prices—that can shift the supply curve. Through relatable examples like pizza production, the video emphasizes how these factors influence economic decisions and predictions, and how understanding these shifts is essential for analyzing markets and making informed business choices.

Takeaways

• 😀 The supply and demand model helps determine the current and future prices of goods, crucial for making economic predictions.
• 😀 The law of supply states that as the price of a good increases, the quantity supplied by producers also increases, creating a positive relationship.
• 😀 Non-price factors, not just price, can shift the supply curve. These include productivity, input costs, number of resources, number of producers, government actions, and future price expectations.
• 😀 Productivity improvements, like more efficient ovens for pizza makers, increase the supply of goods, shifting the supply curve to the right.
• 😀 Lower input costs, such as a decrease in the price of flour, lead to an increase in supply, shifting the supply curve rightward.
• 😀 A decrease in the number of resources (e.g., less available land for production) can reduce supply, shifting the supply curve leftward.
• 😀 The number of producers in a market also impacts supply. More producers lead to greater supply, shifting the supply curve to the right.
• 😀 Government actions, such as raising the minimum wage, can increase the cost of production and shift the supply curve to the left.
• 😀 Expectations about future prices influence supply. If producers anticipate higher prices in the future, they may reduce supply today to sell at higher prices later.
• 😀 The mnemonic 'PINGY' helps remember the non-price factors that shift the supply curve: Productivity, Input Costs, Number of resources, Government action, and Expectations of future prices.

Q & A

What is the main focus of this screencast?

The main focus of this screencast is to explain the supply side of the supply and demand model, particularly how non-price factors can shift the supply curve and influence the quantity of goods producers are willing to supply.

How does the law of supply relate to price?

The law of supply states that there is a direct relationship between the price of a good and the quantity supplied. As the price of a good increases, producers are willing to supply more of it, and vice versa.

What is the 'pingy' mnemonic, and what does it stand for?

'Pingy' is a mnemonic used to remember the non-price factors that shift the supply curve. It stands for Productivity, Input costs, Number of resources, Government action, and Expectations of future prices.

What does productivity refer to in the context of the supply curve?

Productivity refers to how efficiently producers can use their inputs to produce goods. If productivity improves (e.g., through better equipment), the supply curve shifts to the right because producers can supply more with the same resources.

How do input costs affect the supply curve?

If the costs of inputs, like raw materials or labor, decrease, producers can supply more at the same price, shifting the supply curve to the right. Conversely, if input costs increase, the supply curve shifts to the left.

What role do the number of resources play in shifting the supply curve?

The number of resources refers to the availability of factors of production like land, labor, and capital. If resources like key materials (e.g., flour for pizza) become more abundant, the supply curve shifts to the right, indicating an increase in supply.

How does the number of producers in a market affect supply?

An increase in the number of producers in a market leads to an increase in the total supply of a good, shifting the supply curve to the right. If fewer producers enter the market, the supply curve shifts to the left.

What is the impact of government action on the supply curve?

Government actions like raising the minimum wage or imposing regulations can increase production costs, shifting the supply curve to the left. On the other hand, government subsidies or tax cuts can decrease costs and shift the supply curve to the right.

How do expectations about future prices affect current supply decisions?

If producers expect the price of a good to increase in the future, they may reduce their current supply to take advantage of higher future prices, shifting the supply curve to the left. Conversely, if they expect prices to fall, they may increase current supply, shifting the supply curve to the right.

Can you provide an example of how expectations of future prices work in practice?

A real-world example is farmers who harvest corn. If the price of corn is low now but they expect it to rise in the future, they might store their corn and wait to sell it when prices go up, which reduces current supply.