caveat emptor

Caveat Emptor

The principle that a person who buys something is responsible for making sure that it works properly, is in good conditions, etc.

“Let the buyer beware…”

Shifts of the Supply Curve

5.2

Reading Quiz

1. Name two determinants of supply.

2. Would an improvement in technology shift the supply curve inwards or outwards?

3. True or False: moving along the supply curve is the same as a shift in supply curve.

DETERMINANTS OF SUPPLY

1. Change in Price of Resources

• Decrease in price of resources = lower cost

Producers are more willing and able to supply their good at each price.

• Increase in price the of resources = greater cost

Producers are less willing and able to supply their good at each price.

2. Change in the Prices of Other Goods

ALL resources have more than one use.

If the price of a good goes up, producers are more willing to supply that good at each price.

If the price of a good goes down, producers are less willing to supply that good at each price.

3. Changes in Technology/Transportation

Improvements in technology and transportation makes manufacturing more efficient, and therefore, cheaper.

Firms are more willing and able to supply the good each price.

4. Changes in Producer Expectations

If producers expect prices to rise, they will expand supply.

If producers expect prices to fall in the future, they will decrease supply.

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5. Changes in the Number of Sellers

Growth in the number of firms leads to greater supply.

Fall in the number of firms leads to decreased supply.

Causes: government restrictions, taxes, subsidies, going out of business, etc.