· Supply Schedule:
o Perfectly analogous to a demand schedule
o So long as you can produce a good at less than the market price, you can make a profit
o Price Quantity Supplied
o $0 0
o $0.50 0
o $1.00 1
o $1.50 2
o $2.00 3
o $2.50 4
o $3.00 5
· Supply determinants
o It costs more to make more, so you must find the ideal quantity supplied to create the biggest profit
o 1) Marginal Cost
§ Each additional burrito has a marginal cost
§ When the marginal cost of producing each individual burrito reaches zero, that is the maximum quantity supplied you should produce
o 2) Total cost (MC1 +MC2 = price plus price = total price)
o 3) Total revenues (P x Q)
o 4) Producer Surplus (Profts?)
· Law of Supply
o When the price increases it will provide incentive for producers to make more goods
o When the price itself changes, the amount supplied is allowed to increase
o Supply curve can change
§ Change in price moves supply along supply curve
§ Changes in other shifts supply curve left or right
o Long-run supply and short run supply depend on different variables
o By creating a quantity of a good, you have the opportunity cost of not being able to produce another good demanded on the market
§ If prices increase for one good, you are economically better off if you produce more of that good
· Marginal vs. Average Costs
o Marginal cost: The cost of producing each extra good
o Average cost: the cost of every good combined divided by the total number of goods produced
o Total cost: Overall cost
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